Greece: America’s Trojan Horse

The bailout of Greece by the International Monetary Fund (IMF) marks the rebirth of a multilateral organism created at Bretton Woods in 1944 and a tentative indirect intrusion by Washington in the affairs of the European zone. The United States holds 17 percent of the voting rights in the IMF — a fact the Greek government intends to use to pressure their European partners.

Will Greece be the Trojan Horse of sorts for an American interference, through the IMF, in the affairs of the European community? It seems that this is the way it’s perceived in Washington and on Wall Street. The uncertainties and procrastination on the part of the European Union — provoked especially by German resistance — have resulted in exactly what Nicolas Sarkozy, Jean-Claude Trichet and Jose Barroso would have preferred to avoid: the revenge of the IMF.

Behind that, there’s the United States, the most important player in the IMF with 17 percent of the voting rights. Faced with a S.O.S from Greek Prime Minister Georges Papandreou, the only quick response came from an institution located in Washington, D.C.

The word “quick” doesn’t exactly describe the reaction of Brussels, or Berlin. To provide Greece with the 15 million Euros promised to them, the IMF needed to call a meeting of its administrative council. Their speed of execution is remarkable. As it is, the Eurozone has promised it will provide twice as much (30 million Euros), but with plenty of “ifs” and “buts” in the stipulation.

As for the delays, we have to await the regional elections in North Rhine-Westphalia, as the party of Chancellor Angela Merkel fears the backlash from the German taxpayers who are being called upon to assist Greece.

After that, several parliaments in the Eurozone will have to ratify the plans to provide financial assistance to the Athenian government before the promised funds can be transmitted. Finally, these European funds could be delivered sparingly.

From Washington’s point of view, this crisis is a good opportunity to get double revenge. First of all, this appears as confirmation of a sort of IMF “renaissance, like the Phoenix bird in mythology,” a metaphor attributed to Harvard’s Kenneth Rogoff, former IMF Chief Economist and Director of Research.

Second, we called this institution useless, almost like an archeological monument, in 2007. Today, the European Commission and the ECB are forced to admit that only the IMF has the necessary competencies to cope quickly with the risk of bankruptcy. It aims, in effect, to verify the true public financial situation, to define a recovery plan and numerous objectives to fight monetary fraud and increase receipts. It’s what the IMF has learned to do over the last half a century.

A year ago, several European leaders, including Nicolas Sarkozy and Gordon Brown, declared the need for a second Bretton Woods conference. This, to launch a reform of international monetary systems. The idea has been around for a while. Presently, we simply continue to use the IMF created at Bretton Woods at a time when American political power was incontestable.

In theory, the European partners could have superior political clout to that of the United States in the IMF, since, all together, they have 32 percent of the voting rights. But the expression “all together” doesn’t exactly describe how the Eurozone is functioning with regards to the Greek crisis. Moreover, the voting rights of the Europeans will be reduced in the future, as the influence of China, and other global powers emerging within the IMF, increase.

For Barack Obama, the moment of truth came on March 9. On that day, Mr. Papandreou went to visit him in Washington. It was an impromptu trip. Using his connections in the United States, where he lived for quite a while, Mr. Papandreou managed to organize a meeting with the American president and Secretary of Treasury Tim Geithner.

Meanwhile, Greek Minister of Finance George Papaconstantinou “secretly” visited the IMF. But it certainly didn’t stay secret. This is because Papandreou wanted to send an important message to his European partners from Washington: if you let go of me, I have good friends on this side of the Atlantic.

For Barack Obama, a president focused right now on Pacific Asia, this was proof of a weakness within the European zone. Everything that happened between, until the IMF assembly meeting on March 24, did nothing but confirm American skepticism.