Lessons in regionalism: What can the WTO teach the IMF?
The epicentre of financial regionalism is Asia. Emerging East Asian economies, scarred by the IMF’s policy conditionalities during the 1997-98 regional financial crisis, are busily building national reserves and regional financial arrangements so as to wean themselves off the Fund’s influence. During the global crisis of 2008 and 2009, East Asians expanded the regional Chiang Mai swap initiative to $120 billion and multilateralised it into a regional pool.
Chiang Mai has a link to the IMF. Borrowers can draw up to 20% of the loan allocation from it, but need to agree on an IMF programme, including the Fund’s policy prescriptions, to access the remaining 80%. But calls in Asia are intensifying for severing the link, and ambitions are growing for a full-fledged Asian Monetary Fund.
There are a number of other, even if not as widely discussed, regional funds in Europe, the Americas, and the Middle East (MacKay et al. 2010). The European Union has used the Medium-Term Financial Assistance as a balance-of-payments facility for members that have yet to adopt the euro. Anguished by the southern European debt crisis in the spring of 2010, the German finance minister floated the idea of a European Monetary Fund. However, Europe eventually opted for cooperation with the Fund. In order to rescue Greece, the Eurozone nations provided €500 billion and IMF another €250 billion. Europeans also created a €440 billion European Financial Stability Fund among the 16 Eurozone nations that can be activated by the member nations’ finance ministers and a memorandum of understanding with the affected country. Experts assigned to devising a programme came from the European Commission, European Central Bank, and the IMF.
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