European governments were wrestling on Monday night with the prospect of a fresh bailout for Greece a year after they committed 110 billion euros (US$156 billion) to Athens, under pressure from Washington and Beijing to calm the markets and stabilize the euro.
The meeting of the 17 eurozone finance ministers was overshadowed by the absence of IMF Managing Director Dominique Strauss-Kahn, who is facing sexual assault charges in New York. Strauss-Kahn has been a key player in the Greek drama and had been scheduled to attend Monday night’s dinner in Brussels.
The ministers — along with the 10 EU finance ministers from outside the eurozone — agreed on a 78 billion euro bailout for Portugal, the third rescue of a eurozone country in a year. They also signed off on the permanent eurozone bailout fund, the European Stability Mechanism, which is to shore up the currency from 2013.
With governments reeling from Strauss-Kahn’s arrest on charges of attempted rape, Monday night’s meeting was also the first chance for ministers to discuss who would be the next head of the IMF in Washington — the post is traditionally held by a European.
German Chancellor Angela Merkel was the first to say that Europe should retain its prerogative over the post, amid calls that it was time the IMF job went to someone from the emerging economies.
“We know that in the midterm, developing countries have a right to the post of IMF chief and the post of World Bank chief,” she said. “I think that in the current situation, when we have a lot of discussions about the euro, that Europe has good candidates to offer.”
During the past year, Strauss-Kahn has been a decisive advocate of the bailouts, influential in the Greek emergency through his close relationship with Greek Prime Minister George Papandreou. Merkel surprised the rest of Europe last year by insisting the IMF play a central role in the bailouts, with the fund putting up a third of the 750 billion euro rescue pot.
While Greece was expected to plead for more help last night, no decisions were expected for several weeks.
The European Commission said new “arrangements” were possible, with the options including a combination of cutting the interest rate on the bailout money, extending the repayment terms and topping up the loans by up to 60 billion euros.
However, the emphasis in Brussels and EU capitals was on first urging greater austerity on Athens.