The IMF: A synchronized snub of Europe

Patrick Young
Patrick L Young is CEO of niche crowdfunding platform HanzaTrade and an advisor to fund managers throughout the world. Born in Ireland, he is an active investor in the “New Europe” amongst other emerging markets and is an active Co Founder of grassroots startup group "Mission ToRun." Home Page: http://patricklyoung.net Twitter: @FrontierFinance
European Commission President Jean Claude Juncker (2nd L), International Monetary Fund Managing Director Christine Lagarde (4th L), European Central Bank President Mario Draghi (C), Eurogroup President Jeroen Dijsselbloem (2nd R) and European Council President Donald Tusk (R) attend a meeting with unidentified officials at a Eurozone emergency summit on Greece in Brussels, Belgium, June 22, 2015. (Reuters / Emmanuel Dunand)
The IMF moving away from supporting Greece while remaining eager to underwrite bankrupt Ukraine underlines the dramatic collapse in EU power.

It’s probably because it rolls off the tongue more easily. The phrase ‘poker face,’ I mean. The serious exponents of the art of never giving away the slightest facial tic must surely be synchronized swimmers. They have the capacity to deliver iridescent smiles with all movement appearing effortless while exercising in a chlorinated pool. Thus the IMF currently has a remarkable advantage in the stressed world of debt negotiations. The elegantly smooth, former synchronized swimming virtuoso, Christine Lagarde, presides over a development bank whose executive is simmering with frustration at past political fudges.

The IMF’s French-born chief economist, Olivier Blanchard, inferred frustrations with both sides of Greece’s crisis soon after recently announcing his retirement. The IMF has a headache which is the legacy of its former French boss, Dominique Strauss-Kahn. DSK was the champagne socialist with difficulties discerning the status of naked women and indeed ran afoul of US authorities over thresholds in hospitality service. In between exercising his libertine ways, ‘DSK’ had the IMF bend its own rules to bail out Greece in 2010 which was extended further in 2012 (under Lagarde). For the IMF is not supposed to lend money to nations with unsustainable debt burdens.

READ MORE: Greece’s ‘first real proposals’ raise hope of debt deal ‘in 48 hours’

However, to the veteran Europhile Strauss-Kahn, the clear imperative of bailing out Greece had little or nothing to do with the plight of the Greeks. Rather, like most Europhile socialists, his association with the working classes amounts to telling them what to do. Rather it appears DSK was so eager to save the eurozone pipe dream that he thought little of diverting significant resources to save the euro currency regardless of economic reality.

Finally some common sense has prevailed with the IMF refusing to lend any more money to Greece, belatedly accepting the Hellenic Republic cannot hope to repay its debts.

Meanwhile, the EU is lashing out like a desperate wounded bear. The IMF’s sudden return to businesslike pragmatism has been greeted with deep disdain in Brussels. The IMF is being scolded for not realizing the EU must have its political projects ring-fenced from reality. However, the euro is not a fairy tale with a happy ending on the horizon. Once upon a time, the thesis of eurozone prosperity was a breezy mantra for socialist incompetents like Tony Blair in the late 1990’s. The reality has proven a sheer folly, even beyond the Greek tragedy.

Moreover, the IMF has twisted the knife on the wounded EU. Greece is no longer creditworthy but the IMF pledges to continue supporting Ukraine. With 95 percent debt/GDP Ukraine is only half as ‘desperate’ as Greece and roughly as heavily indebted as the UK or USA. However the Trans Atlantic ‘cousins’ have functional economies whereas Ukraine’s oligarchy has struggled since Communism collapsed to deliver a modern free economy. Thus Ukraine has stagnated while neighboring Poland has grown from equivalent size at the demise of the Warsaw Pact to something like four times larger by 2015. Poland’s government hasn’t been particularly effective economically for some time but Ukraine’s has been a consistent disaster.

Nevertheless, despite Ukraine hurtling towards bankruptcy, the IMF remains willing to lend. There may be American background influence through their 17 percent shareholding.At the same time, Ukraine has the advantage of being such a basket case that some structural IMF medicine could deliver measurable improvement. A better organized public sector, with a sound, fair legal framework to promote private property and grassroots commerce could deliver great progress in Ukraine. Underdeveloped Ukraine contrasts with a Greece which zealously guards a dysfunctional post war status quo, wanting to have its cake and eat it, despite Athens’ magic money tree having lost the power to generate cash, let alone bake.

The IMF choosing to keep funding Ukraine may have some shady US overtones of influence but at the same time, the Washington based international lender is deploying a pragmatism which sends out a chilling message to Brussels. Even while yet another Europhile European politician leads the development bank, in truth, the IMF has seen through the simply dismal EU track record. True, past performance is no guide to future outcomes as investment small print always attests. However, with nothing but relative decline to show for Europe’s lost decade, the IMF is now decoupling from riding sidesaddle alongside Brussels’ aloof incompetent delusion.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.