WHEN the euro crisis began in 2010, Germany insisted that the IMF should be brought in as an enforcer: to be tough with the ill-disciplined Greeks and put steel into the soft-hearted European Commission. Three years later the fund is dispensing tough love not just to bailed-out countries but to the euro zone itself. This week in Brussels Christine Lagarde, the IMF’s self-assured boss, was every bit the polite but firm school inspector.

Yes, she said, the euro zone had done good work, for instance in starting a banking union. And yes, the commitment by the European Central Bank (ECB) to intervene in bond markets had restored some order. But the euro zone must do better. The chronic underachievement of its economies and its mass unemployment were worrying. “The centrifugal forces across the euro area remain serious and are pulling down growth everywhere,” said the IMF’s annual Article IV consultation.

The fund forecasts a deeper-than-expected recession in the euro zone this year, and slow growth in 2014. Disruptive Greece is again falling behind in its reforms, particularly in its promise to cull thousands of civil servants, and will doubtless need another debt write-off. Better-behaved Portugal saw bond yields spike after the abrupt resignation of the finance minister, Vítor Gaspar, and may need a second bail-out. Slow-learning Italy was marked down by a credit-rating agency this week, helping to push the euro lower against the dollar. Even the overachieving German prefect saw a sharp drop in exports.

When so many students are failing, it is fair to ask whether the fault lies with the school itself. Is it time to put the euro zone as a whole under a remedial programme? The idea has circulated in various forms, though it runs into legal and practical problems. The euro zone is not a member of the IMF, so cannot borrow money or be placed in a programme. In any case, European institutions are not directly responsible for most aspects of economic policy-making, including taxes and spending.

Even to suggest the idea as an intellectual exercise highlights the failings of the Europeans. The euro zone does not have a balance-of-payments crisis (it enjoys a current-account surplus). Nor does it have a debt-repayment problem. Overall its deficit and public debt are lower than America’s. The euro zone’s biggest problems are all internal.

Yet these are hardest for the IMF to address: it can only advise, not dictate. Europe is consuming the lion’s share of the IMF’s resources. But the fund plays an unaccustomed junior role in the troika, alongside the European Commission and the ECB, that negotiates and oversees the bail-outs for Greece, Ireland, Portugal and Cyprus. Typically the IMF sets terms for all policymakers in a programme country. Yet the ECB sits on its side of the negotiating table, as does the commission, which partly represents the interests of the bailed-out.

An IMF lessons-learnt report on the first Greek bail-out recently revealed some of the tensions. The fund said the commission lacked experience of managing financial crises and fiscal-adjustment programmes; was unduly obsessed with austerity; and would not hear of restructuring Greek debt upfront, as had happened elsewhere. This does not absolve the fund of mistakes. But on balance it recognised them sooner than others in the troika.

Given a free hand, what would the IMF do? It would have written off Greek debt sooner, if not immediately, to stop private investors offloading it onto official lenders. It might have allowed Ireland to impose losses on senior creditors in bust banks (against ECB resistance), and also restructured some Portuguese debt. Having thus relieved the burden, it would have gone slower on deficit-cutting. And it would have put more emphasis on growth-enhancing structural reforms.

And here is your homework

The more intriguing question is what it would demand of the euro zone as a whole, including Germany. The Article IV report sets out four recommendations. First, fix the euro zone’s banks to promote lending and recovery. Losses must be realised, decent banks recapitalised and bust ones restructured or wound up. A forthcoming asset-quality review must be credible, unlike previous stress tests, with the involvement of a plausible third party (the Europeans cannot be trusted to mark their own exam).

Next, create a “full” banking union, including a central authority to “make decisions on burden sharing” (ie, allocating losses) and a dependable backstop financed with public money. Leaving such powers in the hands of national governments carries “significant risks”. Alas, a loose arrangement with a flimsy backstop for years to come is the likeliest outcome, given Germany’s strong opposition to the commission’s proposal this week for a “single resolution mechanism”. The ECB could do more to support lending to small and medium-sized firms. And third, it should also support demand. The ECB should loosen monetary policy still further, even by resorting to negative deposit rates. The pace of austerity, which has been relaxed of late, should be eased further “if growth disappoints”, which it has. Fourth, encourage structural reforms both in individual counties (liberalising labour and product markets) and in the euro zone (deepening the single market in services and securing free-trade deals).

All these should happen at once. A piecemeal approach “could further undermine confidence and leave the euro area vulnerable to renewed stress”. Sadly, piecemeal measures are to be expected. Nothing will happen fast: summer has come and September will be taken up with the German election. Now the immediate fear of a euro break-up has receded, Germany does not want to pay for others, France does not want to be told how to reform—and the worst pupils are reverting to bad habits.