Wednesday 25 April 2018

Guntram Wolff: Troika must reform to prevent any further clashes over policy

EU Economy Commissioner Olli Rehn (far left) and IMF chief Christine Lagarde are at odds over bailout policies
EU Economy Commissioner Olli Rehn (far left) and IMF chief Christine Lagarde are at odds over bailout policies

Since the start of the financial assistance programme in Greece, there have been conflicting views about the right policy way. The three institutions responsible for the programme, the troika consisting of the IMF, European Commission and ECB, disagreed on a number of central policy issues. This raises the broader question about the future collaboration between the IMF and the European institutions.

The most recent controversy is between Christine Lagarde's IMF and the European Commission – including Economy Commissioner Olli Rehn– on the question of when a debt restructuring in Greece should have been done. The IMF had issued a paper arguing that, in Greece, the debt restructuring should have happened earlier. The European Commission responded two days later, contradicting the IMF.

Similarly, in the case of the Irish programme, there had been significantly different views and the possibility and desirability of a bail-in of bank bonds. The debate in the autumn of 2010 was about the question of whether bank losses should be imposed on the remaining around €19bn worth of senior unsecured bonds or whether instead the taxpayer should step in to avoid losses on those bonds.

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