• Desmond Lachman: Cut Greece loose
• Paul Blustein: Take an oath of objectivity
• James Raymond Vreeland: Let regional organizations do the hard work
• Padma Desai: Sharpen the Fund's economic analysis
• Raymond C. Offenheiser: Give the developing world a voice

Cut Greece loose

It is too late to advise Christine Lagarde to reconsider taking on the job of IMF managing director at what is likely to prove to be the most challenging period in that organization's 65-year history. There's still time, however, for her to avoid taking ownership of the terrible mess her predecessor, Dominique Strauss-Kahn, created for the fund with his ill-considered bailout operations for Greece, Ireland, and Portugal. Indeed, it would appear that Lagarde's interests and those of the global economy would both be served best if she were to take a fresh look at the IMF's failed policy approach to the eurozone sovereign debt crisis.

Not to put a fine point on it, but the IMF-EU's "no default and no exit from the euro" approach for the European periphery is not working. The IMF and the European Union have designed a straitjacket of brutal austerity fiscal measures that are producing deep recessions in those countries, which in turn are undermining their tax bases and sapping their political will to stay the adjustment course.

The current program makes no sense. Although it is patently clear that the austerity medicine is not working in Greece, the IMF and EU are about to double the dose with their latest Greek bailout package. The fund is already applying the same failed recipe to Ireland and Portugal.

The policy options Lagarde faces on assuming office could hardly be less appealing. Continuing the IMF's failed policy prescription of sustained austerity without default or devaluation is all too likely to end in tears for everyone involved. It is also all too likely to compound the European sovereign debt crisis and blacken the IMF's reputation across Europe, in much the same way as occurred in Asia in the late 1990s. Yet initiating a course correction in IMF policy is all too likely to trigger a crisis in Europe's banking system that would make the fund the target of international criticism.

If well-handled, however, the latter approach might at least allow for an orderly restructuring of the European periphery's debt, and an orderly exit of those countries from their use of the euro currency. Risky as that strategy might be for the IMF, it is the one Lagarde should opt for if the world is to be spared a second Lehman Brothers-style banking crisis, this time in the heart of Europe.

Desmond Lachman is a resident fellow at the American Enterprise Institute.

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