The International Monetary Fund: “Governments should spend all they can”

Now let's pout a little senator for life Mario Monti. According to reports from Reuters, Kristalina Georgieva, CEO of the International Monetary Fund, should push more on the public spending pedal if they want to revive their economies at this time not brilliant. These claims were made during the International Economic Forum in Gaidar, Russia.

The head of the IMF did not want to overdo the growth forecasts, which obviously must not be red, but she clearly stated that the IMF wants a synchronized increase in public spending for a revival of development worldwide.

Of course, this “Keynesian” inclination of the IMF comes as a bit of a surprise, after years of pushing for policies of austerity, debt reduction and spending containment. It means that, in the end, the "Technical" side of the fund prevailed over the "Political" one, dominated by the usual bad Northern European economists.

This anomalous was even noticed by Georgieva herself: “AI starting from March I started doing a very strange thing for the IMF: I went around telling everyone“ Please, spend more !! ””. "However, at this point we are advocating an accommodative fiscal and monetary policy to protect the economic system from collapse, as we are intentionally limiting both production and consumption."

Georgieva praised Russia's synchronized response to the economic challenges created by the COVID-19 pandemic, citing both the central bank's monetary easing and the finance ministry's fiscal stimulus.

This appeal came after a very similar one from the OSCE. For Europe, however, we have three problems:

• the fact that the European institutions appear completely unable to overcome the constraints of the old and outdated deriving both from original treaties, such as the prohibition of direct financing by the central bank, and from the various Two Pack and Six Pack agreements which, also if temporarily suspended, they have left a restrictive mental imprint;
• despite the expansionary monetary policy and the support of the ECB, the issue of the return in effect of the aforementioned rules still remains on the horizon. Nobody has the courage to change them, everyone knows that they are, and will be, inapplicable to many countries, especially in Southern Europe. However, they remain as a sort of sword of Damocles that prevents real expansionary fiscal policies. Sooner or later they will return to action and for some countries, Italy in the lead, one will have to choose between eternal poverty and extinction, or leaving the EU;
• The operational inability of many countries that combine the European spending constraints, crystallized in internal legislation, with the operational inability of their current class of government.

Gerogieva does well to push spending, but she will face the political and administrative failure taking place in several states.

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The article The International Monetary Fund: "Governments should spend all they can" comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-fondo-monetario-internazionale-i-governi-dovrebbero-spendere-tutto-quello-che-possono/ on Tue, 19 Jan 2021 10:30:02 +0000.