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The International Monetary Fund (IMF) reputedly viewed as the global champion of neo-liberalism and austerity policies has recently had to withstand significant blows with senior IMF officials casting serious doubts over the fund’s future adherence and policy orientation towards the neo-liberal rule book advocating ever smaller government and market deregulation.



In a first stage, senior IMF officials confessed that the IMF’s complicity in imposing neo-liberal austerity policies on European crisis states was going too far: this was actually aggravating rather than resolving the crisis. Later on, official IMF reports stated that private creditors (like hedge funds and investment banks) should have been forced to accept write-downs of their outstanding loans much earlier in the crisis; not least because the financial market-friendly approach that was actually applied disproportionately distressed those at the bottom end of the income scale. It is still unclear whether this narrative constitutes a genuine change of course or is just pays mere lip service to an increasingly hostile public debate and popular overthrow of austerity policies.



On 21 June, the fund’s research department published a new study on the social effects of austerity. Studying 173 cases of fiscal consolidation in 17 developed nations and comparing the impact on equality, the fund concludes that austerity policies drive up income inequality, decrease wage income shares, cause long term unemployment, and put social cohesion at stake. As interrelated effects, the IMF associates persistent disappointing economic growth, waste of human capital, and political instability. Ironically, the IMF also admits that spending-based adjustments (deficit reduction) have had worse consequences on income distribution patterns than tax-based adjustments, which were preferred in the IMF’s policy recommendations to national governments. The publication, included in the related files tab, must be taken for what it is, namely a very serious recommendation to policy-makers contemplating whether to apply austerity: Don’t do it!



There is mounting evidence that the IMF may be reconsidering its most fundamental policy principles in light of their devastating social effects. So far, we have seen a lot of rhetoric but little action. The trade union movement, which has never ceased to press for alternatives to austerity and market liberalisation, needs to keep up the pressure to de-legitimise the Troika imposed measures. Are we seeing the emergence of a new IMF? We are not there yet as imposed austerity measures continue impacting vulnerable groups in the crisis-hit countries but we need to take up every chance for changing the rules of the game.