Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Financialization wikipedia , lookup
Pensions crisis wikipedia , lookup
Balance of payments wikipedia , lookup
Global financial system wikipedia , lookup
Bretton Woods system wikipedia , lookup
Global saving glut wikipedia , lookup
International monetary systems wikipedia , lookup
IFIs’ response to the financial and economic crisis Peter Bakvis, Director ITUC/Global Unions - Washington Office ITUC-FES Seminar on “Challenging the IFIs in CEE” Warsaw, 4-5 October 2011 2. Initially, IFIs fail respond to global financial and economic crisis • The IFIs failed to predict the crisis that broke out in 2007-2008 and initially do not recommend strong action • In July 2007, two weeks before sudden tightening of global credit conditions, IMF increases its economic growth forecasts • After global credit squeeze, IMF leaders caution against new regulations that might “stifle financial innovation”; WB president recommends that US should take action to boost inflated housing prices • Until 2010, the US, which is where the global financial crisis began, is exempted from IMF’s financial sector assessment programme 3. After some hesitation, IMF responds to global financial and economic crisis • In early 2008, IMF changes position and recognizes that a serious economic crisis is underway • IMF recommends that industrialized and some emergingeconomy countries adopt counter-cyclical economic stimulus policies • In late 2008, IMF favours new global financial regulations to control damaging practices that led to September 2008 financial collapse 4. Global crisis gives renewed role to IFIs, especially IMF • Starting in September 2008, IMF negotiates emergency loans with several countries affected by the global crisis for amounts of up to $40 billion • The biggest concentration of emergency loans has been in Europe – 13 countries so far • In April 2009, leaders of G20 countries agree to triple IMF’s lending resources, from $250 billion to $750 billion, and to grant $283 billion in Special Drawing Rights to all member countries 5. Increased lending by World Bank and regional banks • Increased lending also took place, but in a much smaller scale, at World Bank: +23% to $72 billion in 2010 • The regional development banks have also increased lending, such as in the case of the EBRD: +17% to € 9.0 billion in 2010 • WB and regional banks have all sought capital increases or additional grants for concessionary (zero-interest) loans 6. Pro-cyclical stance of many IMF emergency loans criticized • Even though, starting early 2008, IMF counsels many nonborrowing countries to engage in counter-cyclical expansionary fiscal and monetary policies, it initially advises most borrowing countries to engage in pro-cyclical policies • Borrowing countries advised to reduce spending and deficits, freeze or reduce public sector wages and hiring, increase taxes and, in some cases, increase interest rates • In early 2009 IMF introduces condition-free Flexible Credit Line, but only Poland, Mexico and Colombia, which meet “rigorous upfront qualification criteria”, are accepted 7. IMF’s responses to trade unions’ proposals concerning anti-crisis policies (i) • Trade unions have been the most vocal among those urging the IMF to support counter-cyclical economic policies in all countries, both borrowing and non-borrowing • IMF relaxed deficit limits for 2009 in several borrowing countries, but only because the economic decline was far worse than IMF predicted – In loan to Ukraine beginning November 2008, IMF requires a balanced budget (no deficit) and predicts that GDP will grow by 2.5% in 2009 – In reality Ukraine’s GDP falls by 15% in 2009; in July 2009 IMF allows for deficit equivalent to 8.6% of GDP 8. IMF’s responses to trade unions’ proposals concerning anti-crisis policies (ii) • In some cases, IMF said it supported tax measures promoted by unions to finance employment measures or limit social program cutbacks (Serbia, Romania) or progressive income taxes in the place of “flat tax” (Latvia), but none of these were adopted • In one country (Bosnia), IMF defended collective bargaining rights threatened by government’s austerity program • IMF has stated that social expenditures should be given priority, but does not make them loan conditions 9. In 2010, IMF returns to austerity policies • After showing some flexibility and support for expansionary fiscal policies in 2008-2009, the IMF in 2010 began obliging borrowing countries to engage in “fiscal consolidation”, meaning a reduction in government deficits • These fiscal consolidation programs have entailed reductions in public-sector wages and in pensions, dismissals of public-sector workers, and increases in taxes or public service fees • These policies are having the effect of cutting important public services and of slowing down the recovery in countries affected by the global economic crisis 10. ITUC/Global Unions proposals to IFIs for crisis response • In response to the global jobs crisis, IFIs should encourage and support countries’ employment-intensive growth strategies, emphasizing decent work, i.e. adequate income, social protection and workers’ rights • Encouraged by IMF, almost all G20 countries engaged in “fiscal consolidation” in 2010-2011, which has contributed to the renewed economic slowdown of 2011 • IMF and WB should encourage countries to maintain countercyclical stimulus policies until recovery is assured, i.e. no premature exit strategies 11. ITUC/Global Unions proposals for crisis response in IMF borrowing countries • To avoid prolonging the recession, IMF should allow borrowing countries hit by 2008-2009 economic crisis a longer period before engaging in “fiscal consolidation” and reduced deficits • IMF should assist countries to regulate destabilizing capital movements and to apply debt payment moratoria when in financial difficulty 12. Other anti- or post-crisis proposals made by ITUC/Global Unions to the IFIs (i) • Increased developing/emerging-country representation in decision-making structures of IFIs • End all SAPs and other economic policy loan conditions and instead provide financing of public services and state-run pensions without demanding their privatization • Support negotiated reduction of sovereign debts in countries with unsustainable debt levels, e.g. Greece, and reduction of mortgage debts of home-owners holding loans that exceed home values 13. Other anti- or post-crisis proposals made by ITUC/Global Unions to the IFIs (ii) • IMF and WB should encourage equitable sharing of the fiscal burden of anti-recession strategies, ensuring speculators pay at least as high tax rates as workers and ending “flat tax” regimes • IMF should support a Financial Transactions Tax (FTT) so that financial sector pays part of costs of financial crisis and to discourage damaging speculative transactions • IFIs should promote improved trade union rights in all countries, with particular attention to high trade-surplus economies where they can help to correct “global imbalances” (mandate given to IMF by G20)