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Astute Argentina move could still haunt IMF

The IMF has come under heavy fire for its decision last month to roll over $6 billion it lent to Argentina. The republic has failed to implement or even promise any of the reforms the IMF considers necessary, say critics, and the Fund has lost credibility by caving in to the Argentines' blackmail tactics.

Those both inside and outside the IMF who oppose this deal essentially see negotiations between Argentina and the Fund as a game of chicken. The IMF wanted several key reforms, including a plan for unfreezing bank accounts without triggering a run on the currency, and some kind of assurance that Argentina's unpredictable judicial system wouldn't declare vast swathes of the government's programme to be unconstitutional.

Argentina, on the other hand, saw the negotiations much more simply: you helped us get into this mess, now you've got to help us get out. If you don't, there's no reason we should continue to pay you billions of dollars in amortizations every year: it does us no good at all.

The IMF blinked first, under extreme pressure from its big shareholders. Spain, in particular, was a vocal proponent of a new IMF deal, and most observers agree that the final decision to give Argentina the aid was made not by the Fund but by the US government.

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