Auditor slams IMF Greece bailout handling WASHINGTON: An independent probe into the IMF’s handling of European bailouts found that it bent its rules and was vulnerable to political pressure as it embarked on the ill-fated 2010 Greece rescue.
The International Monetary Fund’s Independent Evaluation Office said in its report on Thursday that in the plunge into the eurozone crisis, the Fund’s executive board was poorly informed and exercised too little oversight over decisions which taxed the Fund’s resources.
And it suggested that, led by and operating too closely with Europeans, the Fund underestimated the risks in the European economy and overestimated the region’s ability to handle any problems.
INDEPENDENCE COMPROMISED? The IEO report bluntly criticised the rush by the Fund’s management, led former French finance minister Dominique Strauss-Kahn up to May 2011, to join the European Central Bank and European Commission in the crisis bailouts of Greece, Ireland and Portugal.
It questioned whether the Fund had sacrificed its independence and ability to clearly assess the situation in Europe after joining the bailout “Troika” with the ECB and EC. “The IMF was kept on the sidelines in late 2009 and early 2010 when approaches to dealing with the developing crisis in Greece were being debated in Europe.”
EUROPE ‘TREATED DIFFERENTLY’: The report said that the IMF management’s move to lend Greece more than normally permitted was rushed through the executive board, which represents the crisis lender’s membership, with little discussion and understanding. That raised eyebrows around the rest of the world, where IMF crisis loans have been less flexible.
“Weaknesses in the decision-making process created the perception that the IMF treated Europe differently. The procedure used for Greece was essentially repeated for Ireland and Portugal,” the report said.
VULNERABLE TO POLITICS: While the report held back from concluding that the Fund bowed to political pressure from its European partners, it suggested the pressure was present, especially in the “unusual” arrangement of IMF staff working together with staff from the other Troika institutions.
“The credibility of the IMF comes from the technical competence and independence of its staff, and the managing director must ensure that its technical work is protected from political influence.”