There is more at stake in Greece’s decision to approach the International Monetary Fund for help than just Greece’s economic stability. The decision of the George Papandreou government in Athens comes after much hand- wringing and soul-searching in Europe over the role that ought to be played by Europe itself in offering a lifeline to Greece. Germany’s unwillingness to step in and bail out Greece demonstrates the limitations of the European Union and the managers of the eurozone. German voters are not ready to bail out the Greeks. The other political angle is provided by the undeclared competition for popularity within France between French president Nicholas Sarkozy and the IMF managing director, Dominic Strauss Kahn, a potential Sarkozy rival. Of course, Greece has not yet decided to go to the IMF. It has merely expressed its intention to do so. This in itself, Greece and its European friends hope, will enable Greece to secure a ratings upgrade and thereby access funds from the market. Further, the fact that Greece is willing to go to the IMF may soften attitudes in Germany and enable Chancellor Angela Merkel to step in and help.
But the real and surprising issue that the Greek drama throws up is the discomfort in Europe about dealing with the IMF. The president of the European Central Bank, Jean-Claude Trichet, has gone to the extent of lamenting the approach to the IMF, stating categorically that this should be the last option for the eurozone economies, which should step in and help each other before, it would seem he is suggesting, rushing to Washington DC for help! It is amusing to see the fear of Europe’s politicians on approaching the IMF, even though it is headed by a European and has always been so! If a multilateral organisation dominated by Europe for six decades finds its credibility in Europe under a cloud, one can imagine why the Fund finds fewer takers in Asia, Africa and other parts of the world. Just as in Asia, the unpopularity of the IMF has contributed to the revival, by China, of an old Japanese idea of an Asian Monetary Fund, the Greek crisis has encouraged some in Europe to suggest that there ought to be a European Monetary Fund. This is ridiculous. Instead of opting for Asian, European and other such regional financial institutions, what the global financial system needs is a revitalisation of the IMF.
However, if the IMF has to regain its intellectual credibility, seriously dented by the Asian and trans-Atlantic financial crises of 1997 and 2009, it must cease to function as an extension of the US treasury department and European financial interests and seek rebirth as a truly multilateral financial institution, reflecting the extant global economic system. This means a bigger voice for China, Japan, Korea, India and other successful Asian economies. In the specific case of Europe, where more than one country has already approached the IMF and others are likely to follow suit, it also means coming to terms with this new world order. Europe should not shy away from dealing with the IMF merely because the Fund is no longer a European preserve.
