GREECE began negotiations to boost its bailout with fellow eurozone finance ministers in Brussels last night clouded by the arrest of IMF head Dominique Strauss-Kahn in New York on charges of attempted rape.
While refusing to discuss the fate of the man who was expected to lead the discussions on changes to the Greek bailout, many expected that he would resign his IMF post before long.
The weekend’s shock events were not officially on the agenda for the two-day meeting in Brussels, but ministers were expected to discuss the development among themselves and especially its implications for eurozone bailouts.
Mr Strauss-Kahn was due to discuss possible changes in the arrangements for Greece with German Chancellor Angela Merkel on Sunday ahead of coming to the euro group finance ministers meeting yesterday.
Instead, he was unceremoniously taken off an Air France flight bound for Paris just before takeoff after a 32-year-old maid accused him of attempting to rape her in his $3,000 (€2,116) a night hotel suite.
The former French finance minister, who broadened the scope of the IMF, helped put in place the Greek loans in what was a new arrangement with the EU at the time and got the Germans on board.
“We were really not involved with him over our loan arrangements except to have his oversight of the final press release. As normal we dealt with the team assigned to Ireland,” said an Irish official.
In the short term his resignation is not expected to have a significant effect on the joint EU/IMF bailouts for Greece, Portugal and Ireland where the IMF contributed a third of the funds, but in the longer term it could influence attitudes towards the expected restructuring of the Greek loans.
The European Commission and Chancellor Merkel yesterday ruled out restructuring, with its implications of losses for bondholders, at least before 2013. But some change was expected to be made later in the year, in which Mr Strauss-Kahn would be deeply involved.
Mr Strauss-Kahn was expected to be the Socialist’s candidate for the French presidency elections due to be run off next April and May and polls rated his chances highly.
It was expected that he could well have beaten the incumbent, Nicholas Sarkozy, and seen off the far right candidate Marie Le Pen, who is doing very well in opinion polls.
Even if he is proven not guilty in the US, further allegations are now emerging of similar behaviour in France cementing the belief that the political career of the man known as “the great seducer” is over.
This is on top of a scandal shortly after he joined the IMF where he admitted and apologised for having a relationship with a junior official that was seen as inappropriate.
This is perhaps the most profound effect his arrest and charge will have on the EU. Had he become French president it was believed he would have changed the balance in the EU, being a greater counter-balance to Germany’s chancellor than Mr Sarkozy.
The 62-year-old’s expertise in economics and his globally recognised political ability many expected would lead to the EU adopting a more comprehensive approach to the single currency, such as leading to the introduction of eurobonds, which he supported.
Now many fear that the growing popularity of Ms Le Pen could see her through, probably with Mr Sarkozy to the second round of the elections in a repeat of her father, Jean Marie Le Pen’s success.
© Irish Examiner Ltd. All rights reserved