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Friday, 28 April 2017
 

IMF under Pressure in Washington over Greek Bailout

(Financial Times) - Conservatives in Congress are pushing Donald Trump to block the International Monetary Fund

from participating in a European-led bailout of Greece, as his administration signalled it would take a tougher line with global institutions. Sample the FT’s top stories for a week You select the topic, we deliver the news. Select topic Enter email address Invalid email By signing up you confirm that you have read and agree to the terms and conditions, cookie policy and privacy policy. In what was labelled an “America First” budget revealed on Thursday, the president proposed a $650m cut in US funding over the next three years for multilateral development banks including the World Bank. He also this week nominated two conservative economists with a history of criticising the IMF and the Bank for the two top international posts at the US Treasury. Those two moves came as Steven Mnuchin, Mr Trump’s Treasury secretary, travelled to Germany to meet his G20 counterparts. They also signal that Mr Trump, who railed against “globalists” throughout his run for president, is likely to deliver on campaign pledges to take a fundamentally different approach towards international organisations and the global economy. But conservative Republicans in Congress are eager for him to go a step further. They want him to assert US power over such bodies by taking a hard line and opposing further IMF involvement in Greece, which is sliding towards another crisis this summer unless its European creditors agree to cover billions more in debt payments. A bill introduced on Thursday by Bill Huizenga, a Michigan conservative who was first elected to Congress with Tea party backing in 2011, calls for the Trump administration to oppose any further IMF participation in a Greek bailout. Should the US fail to achieve that aim, the bill would also require the US to oppose any broader IMF quota reforms until Greece had repaid all of its debts to the IMF. “The IMF is supposed to be a lender of last resort, not a fig leaf of first resort for eurozone members,” Mr Huizenga said. Such a step would complicate even further an already sensitive situation regarding Greece, which has been dependent on financial help from fellow eurozone members and the IMF since 2010. Related article Trump’s Republicans have a tough Hill to climb Control of both houses bodes well for tax reform, but mixed signals sap party momentum Germany, which faces national elections later this year, and other eurozone countries facing potential populist revolts are eager for the IMF to begin contributing financially and provide them political cover. But the fund has been taking a hard line. It is refusing to do so unless the government in Athens delivers on further reforms and, crucially, European creditors agree to further debt relief for Greece, whose debts the IMF now calls “unsustainable”. Athens will not be able to honour its obligations unless it receives a further instalment of bailout aid, but some capitals, notably Berlin, warn that it will be difficult to secure parliamentary backing for this unless the IMF has joined the bailout. Euro area finance ministers will meet in Brussels on Monday to review progress, but an EU official cautioned that much work remains to be done, and that ministers were now eyeing May as the earliest realistic date for an overall deal to be struck. An overall accord would not come before the IMF’s spring meeting in late April, the official said. But he added that there was “no upside in procrastinating.” Mr Huizenga, who has been a vocal critic of the IMF’s involvement in Greece for years, said the IMF was being used a political tool by its European members at the cost of its own credibility. “The IMF isn’t a fund to rescue political parties in creditor nations, nor should it be a junior partner to outside organisations that lack the commitment to do their work,” he said. “For seven years now, the IMF has been used to shield eurozone officials from their voters, which has tarnished the fund’s reputation, prolonged Greece’s misery, and put off hard choices about Europe's future that must be made regardless.” The IMF has sent staff back to Athens to negotiate with the government alongside European creditors. But it has also been taking a hard line in discussions in recent weeks and refused to commit any financial resources in what some analysts see as a reflection of the influence of the new US administration. Just how the new administration will approach the Greek crisis remains unclear as it has said little about it. But in an interview with the Wall Street Journal last month, Mr Mnuchin called Greece “primarily a European issue” in what many interpreted as a sign that he would take less interest than his predecessor. Robert Kahn, a former IMF and US Treasury official now at the Council on Foreign Relations, said it was clear that the US was backing the IMF’s tough line on the Greece negotiations and ready to see the fund pull out if necessary. “For the US government in particular, this represents a sharp break from the Barack Obama administration, which pushed for continued IMF involvement,” he wrote in a blog post. “It is unclear at this point whether the change reflects the views of the [Trump] administration, but I would not be surprised if, once the new team is fully in place, the US takes a tougher stance against large but weak IMF programs. If the IMF is serious in its new firm line on Greece, it may find a strong ally in the Trump administration.”