The European rescue of the Washington Consensus? EU and IMF lending to Central and Eastern European countries

Lütz, Susanne and Kranke, Matthias (2010) The European rescue of the Washington Consensus? EU and IMF lending to Central and Eastern European countries. LSE 'Europe in Question' discussion paper series (22/2010). London School of Economics and Political Science, London.

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Abstract

The latest global financial crisis has allowed the International Monetary Fund (IMF) a spectacular comeback. But despite its notorious reputation as a staunch advocate of restrictive economic policies, the Fund has displayed less preference for austerity in recent crisis lending. Though widely welcomed as overdue, the IMF’s shift away from what John Williamson coined the ‘Washington Consensus’ was met with resistance from the European Union (EU) where it concerned Central and Eastern European (CEE) countries. The situation of hard-hit Hungary, Latvia, and Romania propelled unprecedented cooperation between the IMF and the EU, in which the EU has very actively promoted orthodox measures in return for loans. We argue that this represents a European rescue of the Washington Consensus. The case of Latvia is paradigmatic for the profound disagreements between an austerity-demanding EU and a less austere IMF. The IMF’s stance contradicts conventional wisdom about the organization as the guardian of economic orthodoxy. To solve this puzzle, we shed light on three complementary factors of (non)learning that have shaped the EU’s relations vis-à-vis CEE borrowing countries in comparison to the IMF’s: (1) a disadvantageous institutional setting; (2) vociferous creditor coalitions; (3) the precarious eurozone project.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://www.lse.ac.uk/europeanInstitute/LEQS/LEQSHo...
Additional Information:	© 2010 The Authors
Divisions:	European Institute
Subjects:	J Political Science > JN Political institutions (Europe) J Political Science > JZ International relations
JEL classification:	G - Financial Economics > G1 - General Financial Markets
Date Deposited:	09 Oct 2013 08:08
Last Modified:	13 Sep 2024 20:17
URI:	http://eprints.lse.ac.uk/id/eprint/53450

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