PIMCO’s El-Erian: ‘No More IMF Aid to Europe’

“Europe is attracted to IMF financing for four reasons,” he notes. “It is a very cheap source of funding, especially for countries that are essentially shut out of private markets. It can act as a catalyst to unlocking other public and private financing. It is accompanied by a set of policy conditions, including both quantitative and qualitative performance targets. And it can come with technical assistance to strengthen the borrowing country’s administrative capabilities.”

Europe has pressed the IMF very hard to make exception after exception over the course of the past few years, he adds, and it has succeeded, which has resulted in a “number of firsts by an organization that prided itself on the ‘uniformity of treatment’ for member countries.”

“All this has understandably raised concerns among the other members, most acutely in Asia and Latin America where people still have vivid memories of what they were made to go through before receiving what now seem like relatively small loans compared to Europe,” he concludes. “It has also damaged the standing of the IMF in the private sector.”