Demands for reform of the International Monetary Fund (IMF) are gaining momentum in the face of the organisation's apparent failure to calm the growing global economic crisis.
Critics are emerging from almost every quarter: from right wing Republican speaker of the US Congress Newt Gingrich - who accused IMF managing director Michel Camdessus of being "a French socialist who gives money away to crooks" - to left wing politicians and to EU leaders such as Mr Tony Blair and Mr Gerhard Schroder.
This week the Taoiseach, Mr Ahern, added his voice to those calling for reform, saying what was needed was an effective way of dealing with the immediate financial crisis, as well as a long-term strategic approach to reforming the international financial system.
Other critics contend that western banks benefit most from the IMF's rescue attempts.
The IMF has failed to either prevent - or cure - the crisis in the Far East, or indeed anywhere else over the past year, despite mounting huge rescue packages.
This and the effectiveness of the IMF's existing policies and structures is likely to top the agenda when the Fund gathers for its annual meeting in Washington next week. The IMF's difficulties have fuelled a campaign - initiated by Britain and France - to bring the Fund and its sibling, the World Bank, closer together and to create a more powerful international financial institution. But the IMF is resisting this.
The meeting is likely to consider a completely new set of rules and regulations governing the IMF's operations, although it will be difficult to cast these in absolute terms, given the need for flexibility to meet the varying needs of countries in very different circumstances.
Russia, for example, is in such dire straits that up to 1,500 banks are close to collapse, whereas Brazil has a problem with falling external reserves of international currencies - and the possibility that investors will pull out their funds. Some agreement on reform is likely. Following the surprise emergence of financial black holes in Asia, the new rules are likely to include a condition that any country applying for IMF aid must follow a code of complete transparency, informing the Fund of its capital flows and potential problems in good time.
There may also be discussion about how to avoid western banks walking away with the bulk of the aid channelled to countries in difficulty. However, insiders note that given the dominance of the home countries of these banks on the decision-making boards of the IMF, this initiative may not be successful.
The differing roles of the IMF and World Bank - the twin institutions sets up in 1944 as part of the Bretton Woods agreement - will also come in for scrutiny.
The World Bank began life as a long-term lending agency, providing funds primarily to finance post-war reconstruction in Europe and infrastructural projects in developing countries. In contrast, the IMF's initial aim was primarily to sort out balance of payments problems within the global system of fixed exchange rates which prevailed. But the international financial system has changed dramatically since then, and the roles of the two institutions have become confused and their efficiency questionable.
The World Bank has responsibility for overseeing development programmes in less developed countries and still operates as a longterm financing institution. This involves taking a very long view of development and has led to criticism of its approach on many fronts - with, for example, environmentalists attacking some of the projects it has sponsored, for example dams in Africa.
The IMF has primary responsibility for overseeing economic policies, exchange rate developments and balance of payments flows. However, it has also become involved in financing structural adjustment programmes in poorer countries, the implementation of which has been severely criticised by development campaigners. Meanwhile, in a world of free capital flows and floating exchange rates, the expectation that it can act as some kind of international financial authority presents an enormous task for one under-resourced organisation.
The Fund simply does not have the resources to rescue countries from crises involving huge capital outflows. Yet that is precisely what it is increasingly being called on to do, after a year when international investors have pulled massive amounts of funds out of many Asian economies and Russia.
Almost no amount of lending could have plugged the financial holes created by the shift in sentiment against the Asian countries. And in Russia, the political upheaval and doubts about how the funds were being used - much was spent in a vain attempt to prop up the rouble and there are allegations that some money was misappropriated - has drawn further criticism on the fund.
The scale of the international financial flows with which the IMF, as international financial policeman, is expected to deal were illustrated by the near collapse of a US hedge fund - Long-Term Capital Management. It had managed to build up an exposure of $200 billion through complex bets on financial markets and only a last-minute rescue package saved it from a collapse which could have destabilised the entire international financial system.
Given the perception that the vast bulk of IMF money goes to western bankers or is redirected into the pockets of unscrupulous officialdom, rather than preventing or curing economic collapses, it is hardly surprising that the Fund's future and its policies are now at the centre of considerable debate.
In the early stages of the crisis in the Far East, there were three components of the IMF's approach which were widely criticised. The Fund insisted that countries should increase interest rates to defend the exchange rate, arguing that there was no justification for a fall in the currency value as a lot of people borrowed dollars and would be hurt by an exchange rate depreciation.
But critics argued this would throw the economies of the countries affected into recession and worsen the balance sheets of companies who may otherwise want to invest. They argued that the exchange rate should be allowed to fall and while bankers and others lending dollars would lose it would avoid a huge jump in unemployment and a prolonged recession. In the event, the exchange rate pegs were wiped away by speculators in most of the Asian countries affected, as the price of holding the peg to the US dollar became too high.
The IMF also argued that, whether or not a country had a problem with its budget deficit, taxes must be raised and spending slashed. "It was a knee-jerk reaction," one source noted. It gave confidence to foreign investors, but worsened domestic confidence at a time when recession was already looming. The third policy area where the IMF was severely criticised was in its approach to banking rescue. For example, in Indonesia all the banks were effectively bust, but in an action which saw the fund caught between two stools, it insisted a group of banks were to be closed. Not all the banks in trouble were closed, but the move was sufficient to ensure a huge panic and generated a run against all the remaining institutions. Without having a comprehensive plan to rehabilitate the system the fund had insisted on immediate action and the result was a fiasco.
The IMF argues that all the criticisms are exaggerated and that it is being used as a whipping boy. However, it does appear to have accepted some of the points made. In its latest rescue in South Korea, for example, it rowed back on the need for fiscal restraint through higher taxes and less spending and did not push for a hike in high interest rates.
But this is hardly likely to be enough to silence the critics. Insiders say it is easy for people like British prime minister Tony Blair and new German Chancellor Gerhard Schroder to ask why we have so many different organisations, on the international patch, including the World Bank, the IMF and OECD.
Mr Blair is calling for a merger saying the IMF is insensitive and should be more global in its view. And while this may be partly correct, there are very few who expect it to happen. It is likely, insiders say, that some heads will roll and some restructuring take place, but a full merger into one global financial institution is unlikely.
But nevertheless some reform seems almost inevitable. As Professor Brendan Walsh of UCD points out, the IMF is still well suited to sorting out the needs of smaller and even some medium-sized countries. It was patently not up to the job of sorting out crises in large countries such as Indonesia with 200 million citizens, although it does still do a good job in smaller countries like the Gambia, where Professor Walsh has worked.
It is simply too narrow an institution with too small a capital base and not equipped to bail out bigger economies like Indonesia and Russia, he notes.
Nevertheless, there is speculation that the IMF may announce a rescue package for Brazil - seen as the next major economy under threat of capital flight - next week, as soon as the general election there is out of the way. But others note that some sort of bilateral arrangement between the US and Brazil may be more likely, given the country's size and its importance to the US. The American taxpayer is also more likely to support Treasury Secretary Larry Summers talking to Brazil than UN agencies and the French Mr Camdessus. They also remember the last Latin America debt crisis and the success then of the US-led financing initiative
What now happens in Latin America is likely to be crucial for the IMF's future. Brazil is seen as teetering on the edge and a collapse which could quickly spread through Latin America, putting further pressure on Wall Street and undoing much of the good done by the cut in US interest rates earlier this week. That would be bad news for the IMF and may even shake the implacable Mr Camdessus.
