IMF in Euroland

Last year, Ireland raised the prospect of seeking IMF help.  It is highly likely that the Irish government was voicing this prospect as a means of frightening the public sector unions into accepting necessary wage reductions and possible job losses.  The reaction of the market and the unions was not good and reminds us of the risks of playing this type of poker.  Hollow treats are never a good idea.

A recent article entitled "Germany will stand by Greece, says Merkel" clearly indicated that Germany did not intend, at least at that moment, to provide Greece with any financial support.  Mr. Papandreou, the Greek Prime Minister, has indicated that Greece may seek IMF support.  Déjà vu!!  Once again, the prospect of IMF involvement has been raised.  Another hollow treat?

Is it so unrealistic to consider IMF help for eurozone economies in difficulties?  I am not so sure that it would be such a problem.   IMF help would entail adhering to very strict budgets to endure that the country being helped returned to good health in a timely manner.  The patient, in these situations, is the sole concern of the IMF.  Would that be the same if Europe were to provide the support or would European considerations be more important?

In the case of Ireland, French support for any European initiative would certainly require that Ireland "adjust" their corporation tax rate which the French object to but any change would not be in Ireland's interest.  Fortunately, Ireland seems to be turning the corner although we can expect a long convalescence.

Another consideration is that the current head of the IMF, Dominique Strauss-Kahn, could be an opponent for President Sarkozy at the next French presidential elections.  For this reason Sarkozy would prefer not to see any IMF involvement (particularly successful) in euroland.  A recent article on the onĺine New York Times entitled "IMF Help for Greece is a Risky Prospect" is interesting.

Now an agreement has been reached by the 16 eurozone members on a rescue package for Greece should it be needed (Greece has welcomed it but hasn't actually asked for it!!).  This decision requires the 27 EU countries to ratify this agreement.  It would seem that, once again, the spectre of the IMF has been raised in order to progress matters here in Euroland.

As an aside, Spain currently holds the presidency of the EU so, where was Zapatero, who values his role on the European/world stage, when all these decisions were being made?  Apart from the usual suspects, we have had commentaries from the President of the European Council and the European Commission President but not so much from our man.

In my view, given the current stage of the development of the EU, where we have partial monetary union without adequate political union, we would we be better off with an IMF involvement to avoid internal politics and squabbling and allow us to concentrate fully on resolving our problems.

What do you think?