• Print
• E-Mail
• Feedback

12/28/2009

It is becoming increasingly unlikely that the European Union will allow the International Monetary Fund (IMF) to step in and provide ailing euro zone member state Greece with a bailout. A growing number of politicians and central bankers are opposed to any form of IMF intervention.

"We don't need the IMF," Axel Weber, president of Germany's central bank, the Bundesbank, said, according to a report published in Monday's issue of SPIEGEL. Weber noted that it is illegal in Europe to finance budget deficits using the kind of central bank funds which are at the IMF's disposal. With his statement, Weber joins ranks with German Chancellor Angela Merkel, who believes IMF intervention would send the wrong political signal. The EU, she believes, is strong enough to handle Greece's problems on its own.

Central bankers also feel there's another reason the IMF shouldn't intervene: Greece's case, they argue, does not involve a loss of trust in the country's currency. Instead, they say, financial markets have doubts about the credibility of the debtor, the Greek state.

Meanwhile, the research service of the German parliament, the Bundestag, has also analyzed the situation. In an assessment provided to Volker Wissing, a member of parliament with the business-friendly Free Democratic Party (FDP) -- which shares power in government with Merkel's Christian Democrats -- the experts concluded that a member state cannot be kicked out of the EU if it becomes insolvent. Nevertheless, if a euro zone member violates monetary union rules, certain rights that come with EU membership can be suspended. For example, a country could be temporarily stripped of its vote in the European Council, the EU institution comprised of the heads of government or state of the 27 member nations.

For that reason, Wissing is calling for the EU, "to thoroughly examine new members in the future to ensure that they will actually be in a position, in the long term, to meet the demands of a common currency."