The IMF Is Not a ‘Threat’ and Must Remain a Key Actor of a Multilateralism in Crisis

In recent debates on France’s public finances, some commentators and political figures have floated the possibility of an International Monetary Fund (IMF) intervention, framed as a “tutorship.” Are the conditions for such an intervention present today? What cooperative tools are available in Europe? Beyond that, we should question the functioning and governance of the IMF, which today faces heavy pressure from major emerging countries in a context of multilateralism in crisis. An interview with Pierre Jaillet, Associate Researcher at IRIS and Adviser at the Jacques Delors Institute – Notre Europe

Can France’s economic and financial situation justify recourse to external assistance (particularly from the IMF)?

The fall of François Bayrou’s government following the National Assembly’s rejection of a modest savings plan (44 billion euros for 2026, i.e. less than 1.4 % of total public spending) meant to curb the deficit to under 5 % of GDP for 2026 illustrated how emotionally charged the debate on public finances is in France. The divides run through both politics and the economics profession, between denial of reality and dramatization.

Unlike many of its European Union partners, France has continued to run structural primary deficits (excluding interest charges) above 3 % of GDP since emerging from the COVID-19 crisis and amid inflation pressures from the war in Ukraine. Its public debt, once around 60 % of GDP in the early 2000s, now stands at 114 %. That said, it remains below Italy’s (137 %) or Greece’s (152 %). Those countries have since reduced their debt levels by ten and fifty percentage points of GDP respectively since 2021. Moreover, interest on debt—which amounted to 33 billion euros in 2022—could, according to the French Court of Auditors, reach 89 billion by 2029, making it the largest single budget item and further constraining fiscal maneuvering in a climate of slow nominal and real growth.

This trajectory is worrisome compared to our European peers, and financial markets have already priced it in. France’s 10-year government bond rate, now close to Italy’s, has surpassed those of Spain, Portugal, and Greece. Rating agencies have taken notice: Fitch downgraded France from AA- to A+ on 12 September. The European Commission (Debt Sustainability Analysis 2024) and the IMF (Article IV review of France 2025) both warn of a non-sustainability risk of public debt over the medium term if consolidation efforts are not pursued. Economist Kenneth Rogoff (Harvard) notes that while exceeding certain debt thresholds does not guarantee a crisis, it sharply increases the probability one occurs.

Should one conclude, as François Bayrou did in the National Assembly on 8 September, that “France’s vital prognosis is at stake”? Probably not. France is not currently facing a liquidity or solvency crisis. Even under more difficult conditions, it continues to place debt on markets, its political instability does not threaten institutional continuity, its balance of payments is balanced, and external debt is contained. In this light, comparisons with Greece’s 2010–2014 crisis (public deficit 14 %, external deficit 10 %, public debt 180 %, interest rates peaking at 40 %, etc.) are inappropriate.

Given this, recourse to external financial assistance—especially from the IMF—is not currently on the agenda. The IMF’s chief economist, Pierre Olivier Gourinchas, has recently ruled out such a possibility “neither tomorrow nor the day after.”

If such recourse were nevertheless required, could an IMF intervention be equated to “tutorship” over the French economy? What cooperation instruments exist at the European level?

First, the IMF can only intervene at the initiative of a member country. The procedure is formal: a country in financial distress requests assistance, which is reviewed by IMF staff; then a “letter of intent” and a “memorandum of understanding” are negotiated with the member’s authorities, detailing the adjustment program and financing terms. The proposal must then be approved by the IMF’s Executive Board. To talk about “tutorship” is thus misleading, as the country consents to the program and conditions. The term “tutorship” echoes past uses of the IMF as a “scapegoat” when tensions arose in program execution—e.g. with Argentina.

Second, even though all EU countries are shareholders in the IMF and therefore eligible for its support, Europe possesses its own mechanisms. The European Stability Mechanism (ESM), established in 2012 (then merged with the European Financial Stability Facility), is sometimes called the “European IMF.” With a capital base of €700 billion (with about €500 billion mobilizable), it can assist eurozone states facing severe difficulty under macroeconomic adjustment programs with conditionality akin to the IMF’s. The ESM and IMF may intervene independently or in coordination—as was the case during the eurozone crisis (2010–2014) when they worked in tandem with the European Central Bank as part of the “Troika.” The ECB itself has specific cooperation tools. Recall Mario Draghi’s 2012 pledge to preserve the euro (“Whatever it takes”) and the subsequent announcement of Outright Monetary Transactions (OMT). Though never used, OMT allows the ECB to purchase a member state’s bonds under adjustment programs. More recently (July 2022), the Transmission Protection Instrument (TPI) was created—not to rescue countries facing fundamental imbalances, but to counter market dynamics disrupting monetary policy transmission. The ECB can buy public or private securities of member states (if they meet eligibility criteria, such as not being under an Excessive Deficit Procedure, pursuing sound policies, maintaining sustainable debt paths, etc.). This ex ante conditionality is designed to avoid moral hazard by preventing the ECB from acting as a rescuer for member states deviating from fiscal discipline. However, one may wonder how the ECB would act under extreme systemic tension, when distinctions between market dynamics and macroeconomic policy failures blur.              

Rather than depicting the IMF as a “threat”—especially when major emerging powers already exert strong pressure—should we not instead consider governance reforms to allow it to better meet the demands of a faltering multilateralism?

 Political leaders’ talk of imminent IMF intervention can be surprising, if not dangerous: it suggests the financial situation is worse than markets conclude, potentially fueling self-fulfilling dynamics. When firefighters become arsonists… Moreover, sounding the alarm about a supposedly imminent IMF intervention amounts to presenting it as punishment, whereas in the future it could form part of a solution.

Instead of rallying against the IMF, we should reflect on the role and future of an institution born at Bretton Woods in 1944, with a universal membership of 191 countries, whose mission is to promote economic and monetary cooperation and facilitate international trade. In this regard, communiqués from BRICS summits or the Shanghai Cooperation Organization (SCO) meeting in Tianjin (31 August – 1 September) do not overtly challenge the IMF’s existence, but they harshly critique its representativeness and governance.

These critiques are not without merit. Major emerging countries are under-represented: China, whether first or second economy (depending on measure), holds just 6.6 % of IMF quotas, barely more than Germany (5.6 %) or France and the UK (4.2 %). The G7 collectively holds 45 % of quotas, while the BRICS—representing 40 % of the world economy—own only 20 %. Criticism focuses on the quota formula (e.g. absence of a population criterion, which would allow India, for example, to increase from 2.7 %) and the freeze of allocations since 2010. Finally, the U.S., with 17.4 %, retains an exclusive veto, and by unwritten rule the IMF’s managing director remains European (while the World Bank is led by an American).

From the perspective of emerging countries, the governance of Bretton Woods institutions thus reflects pre-globalization power relations. Faced with this inertia, emerging states are creating their own competing institutions: China’s Asian Infrastructure Investment Bank; the New Development Bank (BRICS’ development bank); and more recently a development bank for the SCO. Simultaneously, China is building swap networks with about forty central banks in the Indo-Pacific region and its Belt & Road Initiative partners, becoming a leading creditor to developing countries.

A danger is that the IMF, in a fragmented world, will no longer be seen as a universal institution but as regionally limited, poorly representative, and thus less legitimate—trapped by the West vs. Rest divide and unable to lead economic and financial cooperation. With a U.S. administration committed to rupturing multilateralism, Europeans today appear the only actors capable of launching meaningful reform initiatives—requiring them, in particular, to revise quotas so that major emerging countries’ share matches their economic weight, at the cost of some “sacrifices” by founding states. The idea of a single “chair” for the euro also emerges — coherent with the IMF’s original mission to oversee international monetary relations. It is a delicate, even taboo, subject in European capitals, even though a unified European voice is in principle stronger than a divided one when facing major powers. This could help preserve the universal character and original influence of Bretton Woods institutions.