By: Rab Jafri
As the crisis in Greece continues, EU leaders are accessing the best option for its fellow member. Greece fired a warning shot stating if member states do not come to an accord, then it would have no option but turn to the IMF. European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy are strongly opposed against any IMF aid package, as this would show that the EU is incapable of solving its own crises. On the opposite end, Germany wants Greece to seek help from the IMF and German tax payers simply do not want to bail out a fiscally irresponsible government, which has been racking up debt since it joined the EU.
The benefit of bringing IMF to center stage is that Greece avoids all legal bylaws that govern the European Union. The downside would be the political embarrassment of having an international organization aid a member of the EU. Germany has strongly been opposed to the idea of a bail out, opposition to handouts for Greece has escalated in Germany. Europe’s largest economy is the biggest stakeholder in the ECB and main contributor to the EU’s budget. German Chancellor Angela Merkel on March 17 ruled out “overly hasty” aid pledges, shifting the pressure back to Greece to fix Europe’s biggest budget deficit. To add insult to injury, Chancellor Merkel is quoted by the press that she would support any mechanism that would expel countries from the euro zone that in the future fail to comply with fiscal rules.
Prime Minster Papandreou is racing against time, his government needs 20 billion Euros to repay its bonds maturing in the next two months. Given the urgency, Germany would most likely give in and join the EU leaders in providing a lending facility for Greece. The current situation will test the solidarity of the European Union, better known as a monetary union without a political will.