Kenny declines to row into EU and IMF dispute over Greek bailout

Olli Rehn says troika partner did not support early debt restructuring

Finland’s prime minister Jyrki Katainen and Taoiseach Enda Kenny talk as they walk at the prime minister’s official residence Kesäranta in Helsinki. Photograph: Kimmo Mantyla/Lehtikuva/Reuters

Finland’s prime minister Jyrki Katainen and Taoiseach Enda Kenny talk as they walk at the prime minister’s official residence Kesäranta in Helsinki. Photograph: Kimmo Mantyla/Lehtikuva/Reuters

Fri, Jun 7, 2013, 15:47

Taoiseach Enda Kenny has declined to row into a dispute between the International Monetary Fund and the European Commission over rescue measures for Greece.

At a Helsinki conference Olli Rehn hit out at the IMF for issuing a report on Wednesday saying that Greek debt restructuring in February 2012 came a year too late. “I don’t think it’s fair and just for the IMF to wash its hands and throw the dirty water on the Europeans,” said Mr Rehn at the Economic Ideas Forum in the Finnish conference.

Asked about Mr Rehn’s remarks, Mr Kenny said his critical views of the EU/IMF programme were known and that his Government had worked to improve its terms. “This is not about about getting involved in a row; decisiveness clarity and courage are required,” he said.

Mr Rehn struck back at the International Monetary Fund after it blamed Europe for mishandling Greece’s first bailout, saying the fund itself had not supported an early debt restructuring.

In a report earlier this week, the IMF blamed the EU for allowing Athens to delay restructuring its debts until 2012.

“I recall that the IMF’s managing director Dominique Strauss-Kahn did not propose early debt restructuring, (and that) Christine Lagarde was opposed to it,” Mr Rehn said on the sidelines of a seminar in Helsinki.

Ms Lagarde, who was then French finance minister, replaced Mr Strauss-Kahn as head of the Fund in 2011.

The European Commission - which with the IMF and European Central Bank forms the troika that prepared aid packages for Greece, Ireland, Portugal, Spain and Cyprus - has said undertaking a restructuring in 2010 would have been wrong.

Yesterday, European Central Bank president Mario Draghi also warned against judging “what happened yesterday with today’s eyes”.

The IMF published its view in an assessment of the Greek rescue late on Wednesday. It also admitted it had lowered its normal standards for debt sustainability to take part in the €110 billion bailout - the first of two for Greece - and that its projections for the Greek economy had been too optimistic.

Mr Rehn also criticised Franco-German proposals which included a full-time eurozone economic policy chief and opposition to more powers for the Commission.

He said the proposals threatened the EU’s principle of a community method which allowed smaller member states to play a key role in decision-making.

Co-operation between Germany and France is indispensable for developing the EU, he said but is not enough on its own.

“Europe is too valuable to be left only for Germany and France. That is why we need the community method to make the European Union inclusive, so that small states can also have influence on decisions,” Mr Rehn said in a speech in Helsinki.

German chancellor Angela Merkel and French president Francois Hollande last week opposed handing more powers to the Commission and said making the presidency of the Eurogroup of euro zone finance ministers a full-time post would help improve policy coordination in the bloc.

The proposed moves could widen the gap between the euro zone’s core states and other European Union members that are not in the single currency, and put national governments rather than the EU’s executive Commission in the driver’s seat.

“In many aspects they seem to suggest the wheel should be reinvented,” Mr Rehn said.

Additional reporting Reuters