The IMF has just published a report that slates Europe’s response to the crisis so far. An exasperated tone lurks behind the economese.

The UK managed a fiscal stimulus, but it was on VAT, not infrastructure. Germany has been obstructing all sorts of things, from quick accession to the euro for eastern member states in trouble, to raising the amount countries can ask the IMF to lend them. The EU’s response to the financial crisis has been “unhelpfully diverse”, as different countries try different bank bailouts with talking to each other about them. This causes all sorts of trouble: when Ireland guaranteed all bank deposits in November, people across Europe tried to move their money there – another headache for banks everywhere else. And when the richer western member states tried to act together to support banks in October, they did so without thinking about the east, who saw runs on their banks as investors sought safety in Germany and France.

The most emphatic finger wag the IMF makes, however, is at Europe’s failure to create prices for the toxic assets that litter the continents’ banks. The US stress tests have had their critics, but as we pointed out in our paper on the G20 this April, the Geithner plan made a concerted attempt to make banks’ balance sheets more transparent, and to allow the market to have some information about their likely financial health in the next twelve months. The IMF suggests Europe should follow Geithner’s lead – after all, 70 per cent of the world’s banking write-downs have happened in the US, while Europe has managed a measly 14 per cent. Recapitalisation is all very well – but banks won’t do much better until markets know what nasty stuff lurks beneath.

UPDATE (from Giles) on 14th May.   Peer Steinbruck, who is a becoming a bit of a bogeyman for those supporting a consistent , coordinated approach to this crisis has kicked back against the IMF's proposals.  

 The FT concedes that they are more difficult to design in Europe's fragmented system; nevertheless, "a failure to prepare for the growing pile of bad loans that are expected to appear on banks’ books means economic recovery in Europe is likely to be slower than it otherwise might have been. If regulators do not take advantage of the recent burst of market optimism to shore up their banking systems, they may regret it when the next wave of bad news strikes."

UPDATE 2:  Not content with ridiculing everyone else's economic policies, Peer Steinbruck is apparently now critical of the British eyebrow policy.  This is no joking matter:  David Cameron, a man that some bookies feel might become prime minister one day, has based his policy for financial stabilisation quite squarely on this particular facial feature.