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12 April 2024

IMF economist resigns in protest

By Reuters

A veteran economist at the International Monetary Fund has resigned in protest at what he calls the IMF's failure to head off the global financial meltdown and euro zone crisis, and accused the global lender of suppressing information.

In a resignation letter dated June 18 to the IMF's board and senior staff, Peter Doyle said the IMF's failures to head off both the 2009 global financial crisis and the euro zone crisis was a "failing in the first order" and "are, if anything, becoming more deeply entrenched."

His letter, a copy of which was seen by Reuters, has brought to light simmering tensions within the IMF over the Fund's credibility, which many worry is threatened by its role in the euro zone crisis.

IMF insiders, who asked not to be identified, told Reuters there are concerns within the Fund that it has over-stretched by lending to Europe without exercising the same level of independent judgment it would normally apply in bailouts to emerging economies.

Doyle, a division chief for Sweden, Denmark and Israel in the IMF's European Department when he resigned, also accused the Fund's leadership of being "tainted" by a selection process which always ensures that a European is at the helm.

He said the IMF had been "playing catch-up and reactive roles in the last ditch efforts to save" the euro zone from the "brink." The IMF has participated in rescue loans to Greece, Ireland and Portugal.

Doyle, who has worked for the IMF for 20 years, said the appointments of the Fund's heads over the past decade "have all-too-evidently been disastrous."

"Even the current incumbent is tainted, as neither her gender, integrity, or elan can make up for the fundamental illegitimacy of the selection process," Doyle said of Christine Lagarde's appointment last year as first female head of the IMF.

To be fair, the IMF has acknowledged many of its failures cited by Doyle in reports in 2009 and again in 2011 that honed in on mistakes in spotting the roots of the global financial crisis and not issuing loud warnings about the impending meltdown.

"Peter's remarks are well documented in the public record, including reports issued by the Independent Evaluation Office, via the Triennial Review of Surveillance, and in many statements by the managing director, including on the findings in these various reports," IMF spokesman William Murray said.

"We have no evidence his views were suppressed, nor any views were suppressed," he added.
The sudden departures of the IMF's last two managing directors have shaken the IMF. These include the resignation of former Spanish finance minister Rodrigo Rato in 2007 halfway through his term.

Dominique Strauss-Kahn, the former French finance minister, quit last year after he was arrested in May 2011 for alleged criminal sexual assault and attempted rape of a hotel maid, which he denied and have since been dropped.

Strauss-Kahn's push for an IMF role in the euro zone, including approval of big bailouts for Greece and Ireland, and more flexible IMF conditions, caused tensions with some members of the IMF board. Despite their concerns, many acknowledged that the IMF's involvement was necessary to ensure stability of the global financial system.

Lagarde's appointment just over a year ago followed a hard-fought battle between Europe and emerging economies fed up with the tradition of the head of the IMF always being a European, while the top job at the World Bank going to an American.

"There is certainly a concern that the MD is more a politician than an economist and that she can be swayed by those close to her," one insider said. "But she is certainly seen as a powerful messenger for the Fund's position."