IMF's 'never again' experience in Greece may get worse

Thu Jun 11, 2015 1:55am EDT
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By Paul Taylor

BRUSSELS (Reuters) - For the International Monetary Fund, five years of playing junior partner in European bailouts for Greece has been a "never again" experience, and the worst may be yet to come.

The global lender has lent far more to Athens than to any other borrower, contributing nearly one-third of the total 240 billion euros, with the rest coming from euro zone governments and the bloc's rescue fund.

But it has sat uncomfortably in the side-car of the Greek rescue. Called in by EU paymaster Germany to try to keep the European institutions and the Greeks honest, the Washington-based IMF has never had control of the program.

Now Greece may be about to become the first European nation to default on the IMF, putting it in exclusive company with Zimbabwe and Argentina.

Athens postponed a 300 million euro installment due last week and bundled it with others due this month into a single 1.6 billion euro payment due to the IMF at the end of June.

Greece has said it can only pay if it gets new funds from creditors or is allowed to sell more short-term debt to Greek banks, which in turn hinges on a stalled cash-for-reform deal.

Critics say the IMF has damaged its credibility by going along with political fudges to keep Greece in the euro zone rather than insisting on write-offs, first by private creditors and now by European governments, to make its debt sustainable.

"One of the most important lessons for the IMF from the Greek program should be that a multilateral institution should not institutionalize special interests of a subset of its membership," said Ousmene Mandeng, a former IMF official who is now an economics adviser.   Continued...

Greek Finance Minister Yanis Varoufakis walks next to a European Union and a Greek national flag during a parliamentary session in Athens April 2, 2015. REUTERS/Alkis Konstantinidis