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Why the IMF Has Got it so Hopelessly Wrong on the Euro Crisis

[Ed. Note: The IMF only gets it “wrong” if you’re foolish enough to believe that they were ever working for the best interests of the people, and not the banks.]

by Jeremy Warner, Assistant editor

David Cameron and George Osborne are not for turning, but the International Monetary Fund is plainly made of flimsier stuff. The latest flurry of economic analysis from the IMF – to coincide with the annual meeting in Tokyo – has revealed a not so subtle change of heart over fiscal austerity.

Even as recently as a year ago, the IMF was still vigorously banging the drum for fiscal orthodoxy – countries should strive to get on top of their deficits, the IMF said, and those under severe market pressure had no option but to implement deficit reduction plans “in full and without delay”.

But now the world’s lender of last resort is not so sure. In its latest World Economic Outlook (WEO), the IMF says “fiscal multipliers” had turned out to be larger than previously assumed, especially in circumstances “where synchronised fiscal adjustment is taking place across numerous economies”.

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