IMF didn't seek early Greek debt restructuring: EU's Rehn

HELSINKI Fri Jun 7, 2013 6:47am EDT

European Economic and Monetary Affairs Commissioner Olli Rehn attends a news conference about the convergence report for Latvia at the European Commision in Brussels June 5, 2013. REUTERS/Laurent Dubrule

European Economic and Monetary Affairs Commissioner Olli Rehn attends a news conference about the convergence report for Latvia at the European Commision in Brussels June 5, 2013.

Credit: Reuters/Laurent Dubrule

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HELSINKI (Reuters) - The EU's top economic official struck back on Friday at the International Monetary Fund after it blamed Europe for mishandling Greece's first bailout, saying the fund itself had not supported an early debt restructuring.

In a report earlier this week, the IMF blamed the euro zone for allowing Athens to delay restructuring its debts until 2012.

"I recall that the IMF's managing director Dominique Strauss-Kahn did not propose early debt restructuring, (and that) Christine Lagarde was opposed to it," Olli Rehn told Reuters on the sidelines of a seminar in Helsinki.

Lagarde, who was then French finance minister, replaced Strauss-Kahn as head of the Fund in 2011.

EU Economic and Monetary Affairs Commissioner Rehn had earlier dismissed the IMF's comments, saying: "I don't think it's fair and just that (the IMF) is trying to wash its hands and throw dirty water on European shoulders."

The European Commission - which with the IMF and European Central Bank forms the "troika" that prepared aid packages for Greece, Ireland, Portugal, Spain and Cyprus - has said undertaking a restructuring in 2010 would have been wrong.

On Thursday, European Central Bank President Mario Draghi also warned against judging "what happened yesterday with today's eyes".

The IMF published its view in an assessment of the Greek rescue late on Wednesday. It also admitted it had lowered its normal standards for debt sustainability to take part in the 110 billion euro bailout - the first of two for Greece - and that its projections for the Greek economy had been too optimistic.

Rehn also criticized Franco-German proposals which included a full-time euro zone economic policy chief and opposition to more powers for the Commission, the EU's executive.

He said on Friday the proposals threatened the EU's principle of a community method which allowed smaller member states to play a key role in decision-making.

Co-operation between Germany and France is indispensable for developing the EU, he said but is not enough on its own.

"Europe is too valuable to be left only for Germany and France. That is why we need the community method to make the European Union inclusive, so that small states can also have influence on decisions," Rehn said in a speech in Helsinki.

German Chancellor Angela Merkel and French President Francois Hollande last week opposed handing more powers to the Commission and said making the presidency of the Eurogroup of euro zone finance ministers a full-time post would help improve policy coordination in the bloc.

The proposed moves could widen the gap between the euro zone's core states and other European Union members that are not in the single currency, and put national governments rather than the EU's executive Commission in the driver's seat.

"In many aspects they seem to suggest the wheel should be reinvented," Rehn said.

(Additional reporting by Ritsuko Ando; Editing by Catherine Evans)

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