Imf Speech

Persuasion IMF Speech

Alexandru Geoana

1) Introduction

-background info on the IMF. (formed after WW2, evolved into what it is today)

-briefly explain the role of the IMF.

2) How does the IMF intervene in markets?

a) Spotlight on the Greece crisis: how the IMF intervened (110 billion dollars increased VAT, public sector cuts, tax hikes)

-talk about how the IMF works, with emphasis on the fact that the country’s leaders are still in full control of the economy (money “rounds”, target levels for economic indicators).

-finish with protests (5th May 2010, upper estimates 500,000 people, several killed thousands injured).

-what are the risks if the IMF did not intervene? (credit rating, default.)

b) Why does the IMF impose such strict controls?

i) They cut spending and economic growth, raise taxes, all to ensure that the Gov. runs a surplus to pay back their debts

Ii) Moral hazard, give definition and give Argentina as an example.

explain how no political regime wants to have to ask for an IMF

Is there not another way? Give the example of “Winter of Discontent” in Romania.

3) What’s the problem?

a) Austerity does work in repaying debts the fastest way possible, but it is debatable whether it is in the LT best for the country. In fact, in the SR it is clearly detrimental to living standards, and this goes against one of IMF’s key principles: fighting poverty.

b) Moral hazard in some second- and third-world countries may be unaffected since the Gov. retains the reins of the economy and political leaders will still have access to corrupt streams of revenue (and would be inelastic in the face of political pressure).

4) What’s the solution?

a) The IMF, set up as a fiduciary safety net, should find a middle ground in terms of policy and a new method of handling moral hazard. In terms of policy there are two options:

i) a more moderate form of austerity that will allow the debt to be paid- albeit more...