It seems, that since Christine Lagarde replaced Dominique Strauss Kahn as head of the International
Monetary Fund, relationship between the fund and the European Commission has been strained. These
institutions are two of the three members of the so-called ‘Troika’, a body responsible for agreeing and monitoring all bailouts in the Eurozone. (The third member is the European Central Bank).
Anonymous Brussels’ sources let journalists know that Strauss Kahn was ‘a competent dealmaker’ and that Lagarde relies on ‘the ayatollahs on the fund staff’. The differences came first in public over last year’s revamped Greek bailout: IMF officials insisted on forcing losses on private owners of Greek sovereign debt, fiercely resisted by the Commission, and then pushed for Eurozone countries to take the loses on the loans.
‘The Troika model has become dysfunctional’, said an EU official after, for the first time since the start of the Troika, IMF and European Commission came without a joint plan into the emergency finance ministers’ meeting about Cyprus. It seems that the European Commission continued to try to avoid having Cyprus defray the entire €5.8bn in bailout savings through hits on bank accounts despite IMF insistence. The fund blamed the Commission having ‘the attitude that they are there to save the authorities in every country’.
Mujtaba Rahman, a former member of the Commission’s staff told the Financial Times, that ‘this episode raises questions about the ability of the troika to serve its purpose as an institution designed to facilitate crisis management’.
Does the Eurozone miss Dominique Strauss Kahn as the ‘competent dealmaker’? Maybe...
But without his “faux pas” he probably would be by now the President of France!
By: N. Peter Kramer
