MAN WITH A MISSION:AJAI CHOPRA, the man running the IMF's mission to Ireland, is not a man to forgive laxity when it comes to unfulfilled promises. His record suggests he would be a hard taskmaster if he took charge of a full-blown rescue programme.
He is deputy director of the IMF’s European department and works as mission chief to Britain. He was previously in the IMF’s Asia-Pacific department and led its rescue programme in South Korea after its financial collapse in 1997.
Chopra’s public interventions in that job suggest he would have little patience with any dilly-dallying on the road to recovery. In a stinging public rebuke to the South Koreans three years into the programme, his mission criticised the failure to shore up banks burdened with bad loans. He also accused “zombie” companies of endangering a financial system saddled with more than $100 billion (€73 billion) in nonperforming loans. Sound familiar? Chopra’s sense of the particular intricacies raised by Ireland’s economic descent also appears to be well-developed. Indeed he warned in a report issued only last week that British economic growth would slow down if its banks suffered losses on loans to distressed euro zone countries, Ireland among them.
The report said loans to Greece, Ireland, Portugal and Spain accounted for about 14 per cent of British gross domestic product, a similar level of exposure to that of French and German banks. In Britain’s case, however, claims “are more strongly concentrated on Ireland”. This analysis helps explain the speed at which British chancellor George Osborne declared his willingness to help the Irish bailout.
Chopra’s blog on the IMF website also implies a certain attachment to economic common sense. In thoughts on the crisis in emerging European economies, he argued for restraint in credit booms and prudent fiscal policy.
“When revenue takes off during the next boom, it should be used to build up fiscal buffers rather than boost expenditure,” he writes.
“Politically, this may be very challenging – when revenues abound there is strong pressure to increase expenditure or cut taxes – but this will help dampen the boom and create fiscal space that can be used to soften the impact of the next recession.”
Above all, he says, it’s important in boom times to be wary of claims that “this time will be different” in respect of the risk of a crash. Such narratives may often have some plausibility and attractiveness in the heat of the moment – but careful analysis should always be used as a reality check.
How well we know that now.