Conservative MP and leading critic of the EU John Redwood has complained on his blog about the cost of participating in the IMF bailout for Greece. He does not think that the bailout is working and should not be pursued by anybody, but if other countries wish to do so, they should not oblige the UK to join them.
He notes that the UK’s proposed subscription of £9.5 billion, to be put before parliament soon, amounts to an 88 per cent increase, which is higher than many other countries. Germany is offering 83 per cent, he reports, Switzerland 66 per cent, Belgium 39 per cent. He observes that:
“The interesting thing about the proposed new subscriptions is how variable they are.”
If the UK were to follow Belgium and offer a 39 per cent increase, the new subscription would be £4.3 billion rather than £9.5 billion. While this money is not spent but merely lent, meaning that the IMF subscription is not cash that could otherwise be spent on schools or hospitals, loans to Greece over the last three years have lost 40 per cent (capital and income combined) so there may well be some costs eventually, in which case a reduced subscription might be wise.
However, a country that aspires to global leadership cannot step away when funds are required for a loan to an IMF member. It was true in Libya, too: a country that wishes to see a policy followed internationally has got to be willing to follow that policy itself. If we think that Greece should be lent more money rather than default on the loans it owes to foreign banks (including British ones), we have to be ready to lend ourselves. That is the price of possessing influence.
As with other global institutions, its member states are served by the IMF being a rule-based organisation. The amount of money contributed by each member state should be determined by an agreed rule and not by individual voluntary contributions. If the IMF agrees that a particular sum should be advanced to a particular recipient, its agreement will be hobbled if it then has to beg for the money from the lending countries. John Redwood is right that this is interesting: it is also a problem.
No national government has to beg for money from its taxpayers (the case of Greece is an example of what happens if it does – only 5,000 people admit to an income of more than €100,000) and we should not force the IMF to behave in the same way.
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Furthermore, the consequence of the John Redwood strategy might save a little money if things go bad in Greece but would cost a lot of support that the UK might need itself. We are continually told that the coalition government’s economic inheritance is almost as bad as that of the Greeks, necessitating fast and far-reaching cuts in public expenditure. If the situation really is that bad, we may well need help ourselves soon, in which case it would be foolish to alienate our allies now.