Germany backtracking on IMF involvement in Greece
News reports are now surfacing that the Germans are open to IMF involvement in the Greece sovereign debt crisis. This is a 180-degree turn for the German finance minister who has expressed vocal opposition to the IMF’s involvement in ‘internal’ European Union affairs.
Bloomberg reports Germany making the shift to avoid being boxed in by a bailout pledge:
“We have to think about who has the instruments to push for Greece to restore its capital-markets access” if ultimately needed, Michael Meister, a lawmaker with Merkel’s Christian Democratic Union, said today in an interview in Berlin. “Nobody apart from the IMF has these instruments.” Attempting a Greek rescue “without the IMF would be a very daring experiment.”
The German shift underscores Merkel’s attempts to steer clear of any commitment to a Greek bailout and risks scuttling European Union efforts to establish a contingency plan for the debt-strapped nation. Merkel used a budget speech in parliament in Berlin today to caution against “overly hasty” pledges of financial support.
The position the Germans seem to be taking is the one I outlined back in February (see The Germans will not bail out Greece). However, the situation is still fluid and there is widespread resistance to the IMF’s involvement. My sense is that the Germans do want to move forward with a European Monetary Fund going forward and are now laying the groundwork even if that means involving the IMF.
The plans for the European fund allow for the expulsion of a serial violator of the stability and growth pact. German Chancellor Angela Merkel is now pushing the euro expulsion line because it fits with the Germans’ vision of the EMF.
Greek Prime Minister Papandreou had threatened to go to the IMF over EU objections if he did not receive assistance. This threat has been nullified.
The next move now falls to Greece.