IMF chief Strauss-Kahn tries to ease Greece fears

Posted on Sunday, April 25, 2010

Strauss-Kahn said the IMF was 'there to try to help' the Greek people

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, says the Greek people should not fear the IMF.

He was responding to a Greek journalist who said Greeks are demonising the IMF and fear the country's economic crisis will be worse with its involvement.

He replied that the IMF was there to help Greece, but deflected questions about negotiations with its government.

On Friday, Greece asked for an EU-IMF bailout of its debt-ridden economy.

Mr Strauss-Kahn was speaking after the agency's main ministerial steering committee met in Washington.

'Act fast'

ANALYSIS Andrew Walker, BBC News, Washington A cuddly, friendly IMF - that was the picture painted by Dominique Strauss-Kahn. Inevitably, the prospect of IMF involvement in the Greek rescue has some people worried. The reputation is for painful cuts in public spending, which are unwelcome in their own right and seen by some critics as likely to aggravate an economic downturn. The Greeks are not the only ones demonising the IMF, Mr Strauss-Kahn said. This is how he said they ought to see the IMF: as "a kind of cooperative organization, where all the countries of the world work together to try to help those in trouble. Today, Greece is in trouble. Tomorrow, maybe another". Preventing the crisis spreading to some of those others is what the IMF is keen to do. What we know is that Mr Strauss-Kahn is keen to get on with things and have the IMF loan agreed. But he batted away questions about the detail. It is possible that the loan will break the record for IMF assistance of this type - the previous high was Korea at $21bn in the late 1990s. We do know that European governments, those that use the euro have agreed a figure of up to 30bn euro, about $40bn, a decision that is causing serious strains in Germany's government. For all the cuddliness, the policy conditions are likely to be painful. The aim will be to stabilise Greek government debt. The IMF's critics will argue that cutting public spending is the wrong thing to do in an economy that is already contracting. It is certainly a tough judgment to get right, but further cuts and the political trauma they bring are likely to be on the menu.

The agency has a reputation for requiring borrowing countries to make deep cuts in popular government spending programmes, says the BBC's economic correspondent, Andrew Walker, from the IMF headquarters in Washington.

But Mr Strauss-Kahn said the Greek people should think of the IMF as a "cooperative organisation" where the countries of the world work together to help those in trouble by providing resources and advice on behalf of the international community.

"Greek citizens should not fear the IMF," he said. "We are there to try to help them."

Earlier, US Treasury Secretary Timothy Geithner called on the IMF, the EU and the Greek government to act quickly to tackle Greece's debt crisis.

Mr Geithner asked the IMF and Eurozone countries to put together a package of strong reforms and financial support after talks with with Greek Finance Minister George Papaconstantinou, Mr Strauss-Kahn and several EU officials.

"Secretary Geithner encouraged them to move quickly to put in place a package of strong reforms and substantial concrete financial support," said a statement from his office after the talks.

Athens protest

Consideration of Greece's request for emergency loans totalling 40bn euros ($53bn; £35bn) in the first year has been a focus of talks at the twice-yearly IMF meeting.

Nations using the euro would contribute 30bn euros with the rest coming from the IMF.

The terms of the loans have not been agreed, but Mr Strauss-Kahn has said the IMF will "move expeditiously" in response to Greece's appeal.

Mr Rehn said he thought the EU-IMF package could be completed by early May.

The funds are needed later that month when a large tranche of Greece's debt comes due for renewal.

German officials have said Berlin will do its bit.

But there has been public opposition to funding a bail-out and Chancellor Angela Merkel said any aid would come with "very strict conditions", including a credible savings plan.

The Greek government has already taken austerity measures, including cutting government workers' pay, freezing pensions and raising taxes.

The cuts have proved unpopular, prompting strikes and demonstrations such as a march through Athens on Friday in which several thousand protesters took to the streets.

The government's cost of borrowing on international markets has spiralled, making it prohibitively expensive for Greece to borrow money from investors to service its debt.

Athens had hoped that just the promise of EU support, agreed last month, would be enough to reassure markets and help its recovery.

But Greece's problems have continued to hit investor confidence in the euro and other European economies.

Ahead of the meeting, the Group of 20 big economies said the world was emerging faster than expected from its deep recession.

G20 finance ministers said the pace of the recovery was largely due to the huge amounts of government money pumped into national economies.