Desmond Lachman

How quickly Alan Beattie seems to have forgotten the International Monetary Fund's extreme reluctance in the late 1990s to disengage from large-scale lending programmes in Latin America, Asia, and Russia once it had started down the support path ("Let Europe pay for its policy failures", July 20). The IMF is no more likely to disengage from its Greek adjustment programme before that programme is irremediably off track than it was to pull the plug on the Argentine Convertibility Plan in 2001. This is especially the case considering the enormous ramifications that IMF disengagement from Greece would have on global financial markets.

A critical mistake Mr Beattie makes is to think that the IMF can act independently of the will of its major European and US shareholders. If the IMF were indeed free to act independently as he suggests, it would not have got itself into the situation it did last year of the Quixotic endeavour of trying to address a solvency problem without the support of either a major debt writedown or devaluation.

Mr Beattie is also wide of the mark in suggesting that the IMF might now salvage its reputation by disengaging from Greece. Sadly for the IMF, that train has long since left the station. The IMF has already disbursed more than $20bn to Greece, the largest amount it has disbursed to a country on record, in support of a programme that has seen both the collapse of the Greek economy and a rise in Greece's projected public debt to gross domestic product ratio to an expected peak of 172 per cent.

While the IMF might try to create the narrative that it is the dithering of European policymakers that has got Greece into its present mess, the truth of the matter is that the IMF programme was fatally flawed from the start, in the sense that it prescribed an excess degree of fiscal austerity without the benefit of either a debt writedown or an exit from the euro.

Desmond Lachman is a resident fellow at AEI.