Tags: Europe | IMF | Greek | Bailout

EU's Top Economic Official Lashes Out at IMF

Friday, 07 June 2013 12:39 PM

The man in charge of the European Union's rescues of its debt-crippled countries has slammed the International Monetary Fund's criticism of the Greek bailout, accusing the organization of trying to whitewash its role and throwing the "dirty water" on Europe instead.

The unusually blunt outburst Friday from Olli Rehn, the EU's top economic official, came two days after the Washington-based IMF issued a report acknowledging "notable failures" in handling Greece's 240 billion euro ($310 billion) bailout, blaming some of them on its European partners.

The IMF and the European Central Bank and the EU's executive arm, the Commission, form the so-called troika of creditors that manages the bailouts for Greece and the other three eurozone countries — Ireland, Portugal and Cyprus — that have received emergency loans. As EU Commissioner for Economic and Monetary Affairs, Rehn has played a starring role in the bailouts.

Speaking at an economic conference in his native Finland, Rehn criticized the IMF for breaking ranks with its report, saying in earlier crises it was the norm to go tackle a problem together and "come out from there together."

"That was fair play and that was real partnership, and I don't think it is fair and just that the IMF is trying to wash its hands and throwing the dirty water on the European shoulders," he said.

The three institutions were brought together as an emergency solution in the heat of Europe's debt crisis when Greece was on the brink of a financial collapse that would have pushed it out of the 17-nation eurozone.

But they are turning into an increasingly unhappy threesome. Several EU policymakers, for example, have recently hinted that the bloc should be able to handle future financial emergencies without the IMF's involvement.

The IMF stopped short of seeking a way out, but wrote in Wednesday's report on Greece that there is a "need to find ways to streamline the troika process in the future."

Besides pointing out the inconsistency in Europe's policymaking, the IMF also said the restructuring of Greece's public debt — two years after the 2010 bailout — should have come much earlier in the process but was then "ruled out by the euro area." In the interim, private investors such as banks and hedge funds were paid off in full with bailout funds allowing them to "escape" taking losses, it said.

Rehn's spokesman at the European Commission on Thursday sharply rejected the IMF's soul-searching, saying imposing losses on creditors early on would have spread uncertainty and led to contagion effects that could have put the integrity of the eurozone as a whole in jeopardy.

But on Friday, the usually dry and pedantic Rehn went even further and personally lashed out at the IMF's then managing director, Dominique Strauss-Kahn, and his successor, Christine Lagarde, who was then France's finance minister.

"I do not recall Dominique Strauss-Kahn calling for an early restructuring of Greek debt, but I do remember Christine Lagarde opposing it," Rehn told the Financial Times on the sidelines of the event.

Greece's debt burden was eventually restructured last year, once eurozone leaders felt confident that such a step wouldn't cause excessive turmoil in financial markets. Restructuring debt involves paying investors less than what they are owed.

For Greece, however, the situation remains difficult. Its public debt is still set to rise to 175 percent of its annual output this year, while unemployment hovers around 27 percent as the country is in its sixth year of recession after pushing through painful austerity measures in return for its bailout.

"We, the workers, the trade unions, we have always highlighted the fact that these policies are both unjust for workers but also represent a street to nowhere," said Kostas Tsikrikas, the head of Greece's Civil Servants Confederation. "Not only do they not cure the crisis, but they serve to deepen it further."

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The man in charge of the European Union's rescues of its debt-crippled countries has slammed the International Monetary Fund's criticism of the Greek bailout, accusing the organization of trying to whitewash its role and throwing the dirty water on Europe instead.
Friday, 07 June 2013 12:39 PM
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