Imf-europe strains cast cloud over troika’s future
Are the days of t he troika over? Charged with saving four countries in the eurozone, the informal alliance of the International Monetary Fund and its European partners has exposed its tense underbelly, at the risk of compromising its future.
After months of strains kept under wraps, the IMF unloaded a pointed report Wednesday that criticized European Commission and the European Central Bank (ECB) actions in the troika’s first rescue program, of Greece in 2010.
The Commission, the executive arm of t he European Union, shot back Thursday, saying “we fundamentally disagree” with the report, calling some of its findings “plainly wrong.”
The troika’s scorecard at this juncture is hardly a winner. Only Ireland has witnessed a return of economic growth, while the three other countries under the troika’s supervision -- Greece, Portugal and Cyprus -- are mired in recession and high unemployment under the weight of austerity measures demanded by the aid programs.
But it is the troika’s relationship itself that is now in question. “There’s no reason to hide it -- there are clashes on both sides of the Atlantic,” said a European representative at the IMF, speaking to AFP on condition of anonymity.
“The IMF and the Europeans accuse each other and everyone is on the defensive.”
The troika seems to be suffering from the evolving nature of the 27-state EU and its 17-nation bloc that shares the euro currency. Europeans dragged their heels before seeking help from the IMF and its expertise in following aid programs that require severe cost-cutting measures.
“Europe didn’t want to come to the IMF for its money but for it to define and offer implementation strategies for its economic policies,” said Nicolas Veron, an economist at the Peterson Institute for International Economics in Washington and at the Brussels-based think tank Bruegel.
Cohabitation has not been easy. Accustomed to manage its austerity programs alone and selfconfident, the IMF has had to navigate the complex political and economic channels of the eurozone.
Uncountable meetings in Brussels have hardly masked the divergences of opinion on the level of “sustainable” Greek debt or on the amount of time Athens should be given to reduce its deficits.
“The IMF is in a situation that is more and more uncomfortable because it is involved in policies that are not going as well as it would like. It’s a financial game, but above all, a game of credibility,” Veron said.
The 188-nation fund also must deal with its internal tensions. Some emerging-market countries are upset about the magnitude of the aid programs in Europe and their management, suspecting that the IMF’s legendary strict rules have been bent for political reasons.
“In the case of Greece, the Fund’s lending policies were changed in a casuistic way to accommodate European interests,” Paulo Nogueira Batista, the rep- resentative of Brazil and 10 other countries, said in a statement emailed to AFP.
“The troika arrangement posed (and continues to pose) many challenges for the Fund. More often than not, the Executive Board seemed to be in tow of decisions already announced in Brussels,” Nogueira said, adding that he was speaking on a personal basis.
Does the troika have a future? The ECB seems to have responded in the negative, with top official Joerg Asmussen saying last month that the eurozone should begin to prepare for debt rescues without IMF help.
Asmussen said the European Stability Mechanism -- a firewall worth hundreds of billions of euros if pressed into service -- would become the core eurozone financial defense system.
After igniting the public sparks with its report Wednesday, the IMF sought to calm the storm.
The IMF’s mission chief in Greece, Poul Thomsen, defended the troika’s actions. “Given that these are three institutions that have not had a history of working in that way together, it worked surprisingly well,” he said.
(AFP)