IMF/Greece: The International Monetary Fund may be getting Greek fatigue. That’s understandable. The IMF financed about a third of the first package for Greece, and did the same for the Irish and Portuguese bailouts. But the assumption that it would keep digging into its coffers to help Greece’s second bailout is being challenged by some of the fund's shareholder countries. Emerging market nations such as India and Brazil are leading the expressions of disquiet. Their concerns should be addressed. The IMF should not be routinely funding the euro zone's fiscally challenged members. Further, the euro zone will benefit if it kicks its habit of relying on the fund’s expertise and money.
Christine Lagarde, the new IMF managing director, vaguely said after the July 21 euro zone summit that the institution would ‘continue to play its part’ in the Greek rescue effort. But this doesn't mean the fund has to fork out one-third of the 109 billion euros of new money that European leaders have pledged to Greece. It is under no formal obligation to do so, having said all along that it would decide on its participation on a case-by-case basis.
There are already serious concerns about the extent of the fund's involvement with the country. With the first bailout programme, IMF loans will amount to 32 times Greece's financial stake, or ‘quota’, in the institution. On that score, it is the largest package of aid the fund has ever extended to any individual country.
Now is the time for the IMF to say enough is enough. It will remain involved in any case, to help monitor the implementation of the Greek fiscal tightening and reform plan as required by the first rescue. But as the BRIC representatives argue, there's no reason it should keep pouring money into Athens. It is also hard to argue with the allegation that the IMF is more lenient with European members than it has ever been with other indebted countries. The IMF's involvement in the euro debt crisis was hotly debated in 2010 and only came about because of German insistence. It was a bad idea in principle, illustrating the euro zone's impotence, though it may have been unavoidable. It also helped EU governments to insist that Greek economic reforms should be aligned with the fund's disciplinarian approach. But it's now time for the euro zone to deal with its self-created problems on its own.
