EU rejects IMF criticism of Greek bailout program | Europe| News and current affairs from around the continent | DW | 06.06.2013
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Europe

EU rejects IMF criticism of Greek bailout program

The EU has defended its handling of Greece's bailout program, after the International Monetary Fund (IMF) criticized the bloc's crisis management skills. Athens has praised the IMF's acknowledgment of failings.

The European Commission on Thursday said that it "fundamentally disagree[s]" with an IMF report that criticized Brussels for not allowing Greece to restructure its massive debt burden during the first bailout in 2010.

"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 in Brussels.

"The report ignores the interconnected nature of the euro area member states,” O'Conner said. “Private debt restructuring would have certainly risked systemic contagion at that stage.”

Criticism of EU role

In its report published on Wednesday, the IMF said that there had been problems working with the European Commission. The IMF said Brussels lacked expertise in crisis management and that it had to back track on its original position not to restructure Greece's debt.

"The initial euro area position that debt restructuring was off the table was eventually reversed, although this took a considerable amount of time," the report said.

The Troika - made up of the European Commission, the European Central Bank (ECB) and the IMF - originally granted a 110 billion euro ($144 billion) bailout in 2010. The IMF contributed 30 billion euros. But in 2012, the Troika had to approve a second 109-billion-euro bailout to keep Athens afloat.

The second package included a debt restructuring program that asked private creditors to cut their holdings and also gave Greece a longer time frame to pay back its loans at a lower interest rate.

IMF admits own failures

But the IMF also criticized its own actions. The Washington-based organization said that it had lowered its standards on debt sustainably to grant Greece a bailout. The IMF also said that its growth forecasts for Greece can “be criticized for being too optimistic.”

The report said the IMF “lowered the bar” for Greece, because its debt problems were considered to have a systemic impact on the broader eurozone. These “notable failures” ultimately contributed to a 22 percent economic contraction in Greece, the report said.

In recent months, the IMF has called on the European Commission and the ECB to ease austerity measure imposed on Greece as part of its bailout packages.

Former Greek Finance Minister Evangelos Venizelos said the IMF report vindicated positions that Greece held during bailout negotiations.

"The IMF report confirms and records the positions that we have repeatedly presented in public, which formed the basis of our arguments during tough negotiations with the IMF and the other two parties of the Troika," Venizelos told the Reuters news agency.

slk/dr (AP, AFP, dpa, Reuters)