Superfluous bad cop

IMF and Greece: Should the euro zone hire Supernanny? Calls for the International Monetary Fund to step in and take care of the Greek crisis are multiplying, as many investors don't seem to believe the EU is up to the task of disciplining one of its own members. Some of the arguments in favour of a traditional IMF rescue mission are strong. But the counter-arguments are stronger.

Advocates of the Fund's intervention point out that the IMF is used to dealing with this sort of problem. It doesn't mind playing the bad cop - a role Europeans can't fully play, fearing it could trigger an anti-European backlash in Greece. More important, the fund has the necessary resources and competence.

Moreover, the IMF's mode of intervention - stand-by loans - is well suited to conditionality.

It only disburses money once it has made sure the government is implementing the promised turnaround plan. The euro zone, by contrast, is looking at offering Greece financial guarantees, which cannot easily be made conditional. But the problems of inviting the IMF in far outweigh the potential benefits. First, because it would undermine the euro zone’s political credibility. Euro countries individually participate in the IMF, but the single currency group must show it can deal with its own problems. It shouldn’t outsource crisis management. Second, Greece does not - at least not yet - face a solvency problem. It is not short of cash, but needs a sufficient breathing space to start implementing crucial reforms. And the EU seems to be showing it can muster enough political will to put the necessary pressure on Athens.

Finally, the IMF would lack an important tool of its trade in Greece. When it intervenes in Ukraine, Hungary or Latvia, the IMF suggests a comprehensive fiscal and monetary programme, which may include devaluation. But Greek interest rates and monetary policy are set in Frankfurt. The EU has said the IMF would provide technical expertise to help Greece. It need not ask for anything more.