IMF's Chopra says Europe must do more for Ireland
Rift widens between Fund and Europe over bailout terms
Published 21/05/2011 | 05:00
The IMF has launched an unusually strong attack on how Europe is handling Ireland's debt woes and the euro debt crisis more generally.
The comments from the Washington-based organisation come as worries grow that without a change of stance from Europe, the Irish plan could unravel.
There are now major differences between the IMF and the EU over the best way forward for the likes of Ireland, Portugal and Greece.
The IMF said Ireland needed more "support'' from its European partners to meet its current challenges otherwise the current €85bn plan may not be "sufficient''.
In hard-hitting remarks, Ajai Chopra, deputy director of IMF Europe, surprised observers by directly referring to the kind of package Europe has put in place for countries locked out of the bond market.
While ruling out a default, Mr Chopra said: "The countries cannot do it alone,'' he warned. It was now a "matter of urgency'' for countries like Ireland to get more help from Europe.
Ireland was making the correct adjustment -- in terms of tax hikes and spending cuts, but this was not the only thing needed, he emphasised. "It will be just as important these efforts are supported by a more comprehensive and consistent European plan,'' Mr Chopra explained.
"Countries that are implementing the required policies to address their problems need the support of their European partners,'' said Mr Chopra, the man credited with designing the Irish bailout package sealed in December. "The problems that Ireland faces are not just an Irish problem, they are a shared European problem that require a shared solution."
Europe needs more integration, not less, he added.
The Irish authorities were doing all they could to reduce the deficit, but Europe needed to provide cheaper loan deals, and the ECB needed to provide medium-term funding to help the banks stabilise, he added.
Mr Chopra said he was happy with Ireland's progress, but "additional financing at appropriate terms'' may yet be needed to keep the bond market re-assured. He refused to elaborate further.
Medium-term ECB liquidity support was "critical'' for Ireland he also said. The deleveraging by the banks would be "supported by medium-term availability of euro-system financing,'' he said.
"The Irish authorities are doing all they can to get ahead of problems. We do not detect any wavering; they are in it for the long haul,'' Mr Chopra said of the Government's approach.
In detailed documents released yesterday by the IMF, the fund praised the Government for resolutely following the terms of the deal, but highlighted that risks to the programme still exist.
It said that a combination of slower growth and higher unemployment rates, together with higher bond spreads and rating agency, have increased the risk that the plan could fail, if it remains structured in its current format.
Meanwhile, the ratings agency Fitch has downgraded Greece's long-term foreign and local currency rating, and Norway suspended a $42m (€29.6m) grant payment to the country for failure to comply with its commitment. The moves helped trigger a sell-off in the euro to $1.4167.