It was perhaps inevitable that the Greek crisis would hijack the spring meeting of International Monetary Fund this week, but the damage to the international lending agency could grow much worse as the situation in Europe becomes increasingly acute. The standoff between a new Greek government seeking debt relief after five years of grinding recession and authorities at the IMF and European Union, who were unbending in their demands to follow through on further austerity measures to get more bailout money, dominated discussions at the meeting that brings economic policymakers from around the world.
Greece faces a deadline Friday to submit a list of specific reforms to the European Union that will unlock nearly $8 billion in bailout funds that it needs to meet loan repayments falling due next month. The Greek imbroglio overshadowed other messages from IMF officials this week regarding new sources of financial instability in the world, the need to stimulate economies to more vigorous growth and even discussion about other financial and geopolitical hot spots, such as Ukraine.
But the unwillingness of IMF Managing Director Christine Lagarde and her staff to countenance any relief for Greece stands to make the agency an accessory to the potential turmoil that could spread well beyond Greece as the chances for a reasonable, agreed solution to the crisis grow slim. A debacle in Greece would further tarnish the reputation of an agency that has already seen its credibility and influence diminished. It was perhaps a fitting sideshow to the drama in Washington that a former IMF managing director, Rodrigo Rato, was briefly detained Thursday in Spain as part of a money-laundering investigation and may be charged in the case, even as he is being investigated for other infractions.
Rato led the IMF from 2004 to 2007, and was succeeded by Dominique Strauss-Kahn, a political heavyweight who aspired to the presidency of France but who had to leave the IMF post under a cloud of scandal in 2011 over charges of sexual assault against a New York hotel maid. Lagarde, then French finance minister, was parachuted in to take his place, though she herself is involved in a long-running judicial probe over an arbitration process she approved that awarded half a billion dollars to a businessman with ties to her center-right political party.