My question yesterday about which countries might be next to come forward for IMF loans has been amply answered!
Today, the IMF announced Poland would seek a $20.5 billion flexible credit line, to insure against any future problems and help it meet its financial commitments.
Now, the New York Times has a story up about how Britain may require IMF assistance. It faces a deficit likely to reach 11 percent of its gross domestic product and rising unemployment. Worryingly, it failed to sell its full offering of government bonds at an auction last month. The NYT article reads:
...Britain’s deteriorating public finances might require the government to seek aid from the International Monetary Fund, just as it did back in 1976 when the country’s economy was on its knees.
As remote as that possibility might be, it underscores the financial bind Britain is in and represents another humbling comedown for a country that once had ambitions to overtake New York as the world’s financial capital.
The IMF has tried to alleviate the stigma attached with seeking a loan, usually provided to truly failed economies. And Poland's received plaudits for seeking aid from the IMF; the finance minister said, "This is the reflection of our cautious and responsible economic policy."
Thus, the question becomes: if the IMF offered a loan that cost less than borrowing in other ways, would once-strong and still-responsible governments still turn them down? That is, would politics stand in the way of economics?
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