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EU, IMF clash over 'mistakes' in handling Greek bailout
June 6, 2013 / 5:01 PM / 4 years ago

EU, IMF clash over 'mistakes' in handling Greek bailout

BRUSSELS (Reuters) - The European Commission clashed with the International Monetary Fund on Thursday over their handling of the first Greek bailout, which the IMF said had pushed an extra burden on euro zone taxpayers by letting Athens delay restructuring its debts.

The Commission, together with the IMF and the European Central Bank, forms the so-called Troika that prepared financial assistance programs for Greece, Ireland, Portugal, Spain and Cyprus in the three years since the euro zone sovereign debt crisis started.

The IMF said some aspects of the first aid package to Athens might have been handled better, starting with a restructuring of Greek privately held debt already in 2010.

“I think we would all agree that some things could have been done differently,” IMF spokesman Gerry Rice told reporters in Washington. “And I think we would all agree that with our European partners we have learned, and we have adapted.”

The European Commission said the first, 110 billion euro rescue for Greece had been put together in extremely difficult circumstances and stressed it had a very different view from the IMF on the feasibility of an early Greek debt restructuring.

“The (IMF) report argues that an upfront debt restructuring in 2010 would have been desirable. We fundamentally disagree,” Commission spokesman Simon O‘Connor told a news briefing.

Greece restructured privately held Greek bonds only in 2012, imposing losses of more than 70 percent on investors after the country’s recession turned out to be longer and deeper than anticipated and reforms were delayed.

“An upfront debt restructuring would have been better for Greece although this was not acceptable to the euro partners,” the IMF report said late on Wednesday.

It said the delay only allowed private investors to sell their Greek bonds and shifted the burden to euro zone governments and their taxpayers, who now, being the main creditors of Greece, might have to offer it further debt relief if the country meets agreed fiscal targets.


The IMF said it, too, made mistakes; it lowered its normal standards for debt sustainability to take part in the bailout and made overly optimistic forecasts for the Greek economy.

The euro zone had asked the IMF to take part in its emergency lending programs to boost their credibility with markets, undermined by the lack of respect for the European Union’s own budget rules among EU governments.

After three years of close cooperation with the single currency bloc on five aid packages, the IMF said their operations would benefit from some changes.

“Options for dividing up work on areas that are not macro-critical should ... be explored,” the IMF said in the section of its report entitled “Possible lessons”.

“There may also be some scope for streamlining procedures and documents to reduce the burden on the authorities,” it said.

European Central Bank President Mario Draghi told a news conference the IMF’s remarks should be considered.

“If the IMF decides to do a mea culpa, identifies mistakes that have been made, we have to take this into account in the future,” he said, but appeared to distance himself from the IMF’s view that debt restructuring should have happened earlier.

“Often ... you judge what happened yesterday with today’s eyes. It’s always very hard to make ex-post judgments,” he said.

Last month ECB Executive board member Joerg Asmussen told the European Parliament that the arrangement with the Troika should eventually be replaced by the euro zone bailout fund and the European Commission. But this was for the future, he said.

“I would not advise to change the Troika system now in the middle of the crisis,” he said. “We have no alternative to it right now.”


Some euro zone policymakers, including authorities in Berlin, are unhappy with the fact that the Troika is composed of officials who are not democratically accountable for the tough reforms they prescribe to governments.

“It is clear that the Troika needs to be rethought,” said Sharon Bowles, who heads the European Parliament’s economic committee. “It is not possible that decisions which strike at the very heart of a country continue to be taken without the proper level of accountability,” she said.

Asked about the prospects for future cooperation with the IMF within the Troika, the Commission spokesman said the two organizations had been effective despite their differences in extremely complex circumstances.

“We have different traditions, different approaches to many issues. We have always managed to come to sound and constructive solutions and a way forward. I would not jump to any conclusions if there should be any changes to the way we work together on the basis of this report,” O‘Connor said.

Additional reporting by Anna Yukhananov; in Washington, Noah Barkin in Berlin and Paul Taylor in Paris; Editing by Will Waterman

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