This book uncovers the cold, hard realities that lurk beneath the technical complexity of modern financial diplomacy. Many commentators on both the left and the right insist that powerful officials in international organizations such as the International Monetary Fund and the EU dominate global finance. Yet such institutions rarely act independently. Instead, just like domestic political institutions, they are arenas of political conflict. Henning analyzes the European financial crisis of the last decade, focusing on seven debt-restructuring programs that pitted creditors against debtor nations. He explores why oversight of such programs lies with the so-called troika formed by the European Central Bank, the European Commission, and the IMF—a cumbersome arrangement that increases complexity, reduces efficiency, and undermines European integration. The reason, Henning argues, is that parliaments in powerful creditor countries, notably Germany, will only approve institutional arrangements designed to do their bidding to the greatest extent possible. Ironically, given the widespread belief that the EU suffers from a “democratic deficit,” creditors rejected an EU-based solution—a proposed European Monetary Fund—because it would have diluted their power and restricted the imposed austerity that benefits them.
Get the best of Foreign Affairs' book reviews delivered to you.