14th Aug 2022

IMF slams EU over slow-moving crisis reponse

  • The troika mission was met with protests in Dublin (Photo: informatique)

The International Monetary Fund has sharply criticised the EU's protracted debate over its second bailout for Greece saying it urgently needs to "dispel uncertainty".

"What is critical now is for Europe to dispel the uncertainty that is being created by the lack of what is perceived by markets as an insufficient response" Ajai Chopra, IMF mission chief to Ireland, said on Thursday while announcing the results of a review of Ireland's economic EU-IMF economic programme.

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"What is lacking so far is a European solution to a European problem."

He went on to say that the risk of contagion of eurozone malaise - Italy saw a sharp spike in its borrowing costs last week - is pushing up Ireland's yields.

"If it wasn't for contagion risks we would be seeing significantly lower spreads in the case of Ireland. The downgrade is largely a reflection of events outside Ireland."

With Greece, Ireland and Portugal all subject to an EU-IMF loan, and Athens in line for a second one, there have been worries that crisis could spread as markets doubt the EU's political commitment to deal with the current troubled states.

This doubt has deepened as eurozone states have been locked in a struggle to work out the technicalities of involving the private sector in a second Greek loan, something pushed by Germany but viewed by agencies - even if the participation is voluntary - as akin to a selective default.

"We need to come to closure on this debate on private sector involvement," Chopra urged.

But while the EU may have come in for criticism, the international assessment team, which also includes representatives from the European Central Bank and the European Commission, gave Ireland the thumbs up for its work so far on bringing down its large deficit.

"The teams' assessment is that the programme remains on track and is well financed," the three institutions said in a statement.

They recommended that Ireland should get the next €4 billion installment of its bailout, as well as an additional €500 million in bilateral loans from the UK.

With the voices of protesters outside clearly audible during the press conference, Chopra was asked directly about the harsh social consequences of the EU-IMF programme.

Ireland has an unemployment rate of 14 percent. Its citizens have been subjected to higher taxes while at the same time seeing a sharp reduction in basic public services.

Chopra replied that Ireland would have been worse off without the international community stepping in.

The adjustment would have been "much more painful" without the EU-IMF "cushion", he said.

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