IMF slams EU handling of crisis

2011-07-14 18:08

Dublin - A senior International Monetary Fund (IMF) official has blamed infighting in Europe over how to deal with Greece's debt crisis for heaping even more pressure on Ireland.

Ajai Chopra, the head of the IMF's mission to Ireland, described Europe's response to its debt crisis as "insufficient."

Disagreement over a second rescue program for Greece have reignited concerns over other countries' finances, including those of Ireland.

"What we need, and what is lacking so far, is a European solution to a European problem," Chopra said at a news conference in Dublin on Thursday.

Chopra was speaking as the three institutions overseeing Ireland's bailout gave a broadly-positive assessment of the country's implementation of the reforms, budget cuts and tax rises promised in return for €67.5bn in rescue loans last year.

"The teams' assessment is that the program remains on track and is well financed," the IMF, the European Commission and the European Central Bank said in a statement. The three institutions recommended that Ireland should get the next €4bn installment of its bailout, as well as an additional €500m in bilateral loans from the UK.

However, the positive assessment from the so-called troika, which was expected, may not have much of an impact on investor confidence in Ireland's ability to repay its massive debts.

Rating agency Moody's earlier this week cut the country's rating to junk, despite acknowledging that the government in Dublin had stuck to the targets set out in its bailout program.

Ireland has been hit hard by waning confidence in the eurozone's ability to overcome the debt crisis, which has rocked the continent for the past year and a half. Moody's said current market rates make it unlikely that Ireland will be able to raise money again when its bailout runs out at the end of 2013 and that any new rescue loans would likely see banks and other private investors take a hit.

Chopra also said Ireland's downgrade was prompted more by developments outside the country than by the implementation of its bailout program.

The eurozone has been pushing Greece's private creditors to voluntarily contribute to a second rescue package for the country - a move that rating agencies would likely consider a partial default by Greece on its debts.

The debate on private sector involvement has shaken markets in recent weeks, especially since governments have withdrawn their previous commitment to avoid a default.

"We need to come to closure on this debate on private sector involvement," Chopra urged.