Eccentric in tone and cryptic in content, the resignation letter of a senior International Monetary Fund official released last week was, nevertheless, important for what it implied: the IMF is failing in two key respects. It has not provided independent intellectual leadership, most evidently on the eurozone crisis. And it is unprepared to provide stability for the next big global crisis. With Spain and possibly Europe inching back towards the abyss, that crisis looms. The possibility of the IMF being missing in action is cause to sound the alarm bells.

On the eurozone, the IMF has towed the official European/German line on the crisis, possibly to the disservice of Europe and the world. It has not been a source of new ideas or critical thinking on key issues such as: the workability of the strategy for Greece; the responsibilities of creditor countries, including the need for symmetric adjustment in a currency union; and the alternatives to austerity in the short run. It is not that the official line is wrong but that the IMF has failed to challenge orthodoxy, forfeiting its role as a valuable referee in the policy debates. If things turn bad, the IMF will have to bear responsibility for its complicity in the less than optimal policy choices made in Europe.

In response, the fund invokes the familiar defence that it does indeed voice its opinions and concerns, but privately. The IMF cannot go public and precipitate the very crisis that it is enjoined to prevent. Moreover, especially as the junior partner in the troika, it has to work with governments. So while it can influence and challenge policy choices before they are made, it must fall in line once they are made.