The IMF’s Role in the Eurocrisis
On Wednesday, April 15, 2015, the German Marshall Fund of the United States (GMF) with the Centre for International Governance Innovation (CIGI) hosted a roundtable discussion on “The IMF’s Role in the Eurocrisis.” The event was moderated by Peter Sparding, a Transatlantic Fellow at GMF. The featured speakers were Ajai Chopra, Visiting Fellow at the Peterson Institute for International Economics; Megan E. Greene, a Non-Resident Fellow of GMF and Managing Director of Manulife Asset Management; and Miranda Xafa, a Senior Fellow at CIGI and CEO of E. F. Consulting. The event, held under the Chatham House Rule, was well attended by 25 attendees from the Washington policy community with several decades of IMF working experience around the table.
The discussion began with the focus on the beginning of the Eurocrisis and the pressure that the International Monetary Fund (IMF) was under at the time. There was concern of contagion with little initial appetite for debt restructuring in Europe. Still, the IMF could not simply walk away from such a major systemic crisis and at the same time had to deal with political sensitivities. The suggestion that the IMF holds a “junior status” in the Troika, as it only accounts for a third of the financing to Greece was countered by the assertion that demands in some EU member states for the IMF’s participation generated leverage for the IMF. Overall, it was broadly agreed that the IMF requires changes to allow it to deal with crisis with more discretion and in a rules-based manner.
The public relations problem of the Troika was also discussed. In this regard, the situation within Greece and Ireland was described as a massive public relations crisis for the IMF and the Troika in general. While the IMF functioning as a scapegoat is not a new phenomenon, it was stated that the IMF must assert its power and do more outreach to prevent this type of public relations disaster in the future.
Regarding the current situation with Greece, some participants noted that neither side in the negotiations has an incentive to “blink” until the very last moment. Each negotiator in the EU must prove to their constituencies that they have negotiated a hard deal; therefore it is unlikely that an agreement will be met before the last possible minute. Chancellor Merkel’s work was typified as building a bridge between these two parties, and now each side must cross that bridge.