The European Commission on Thursday said it fundamentally disagrees with an International Monetary Fund report that places much of the blame for Greece’s botched first bailout on Europe, rejecting criticism that the EU should have consented earlier to a restructuring of Greek debt.
In an internal report released on Wednesday, the IMF said there had been "notable failures" in the way Greece's 240 billion euro ($310 billion) bailout was handled, admitting that it had underestimated how much austerity measures would worsen the country's economic plight.
In particular, the IMF said Europe’s political failings contributed to the bailout programme’s lack of success, citing “poor implementation of reform by authorities, adverse political developments and inconsistent policy signals by euro leaders.”
"The Greek program was also subject to considerable uncertainty as the euro area policy response evolved," the Fund said. "For example, the initial euro area position that debt restructuring was off the table was eventually reversed, although this took a considerable length of time."
But Brussels firmly rejected the IMF criticism, saying it “fundamentally disagrees” with some of its findings.
On Thursday, Simon O’Connor, spokesman for the European Commission, said that if Greek debt had been restructured before the country was granted its 2010 bailout, there would have been "devastating consequences" that would have destabilised the rest of the euro countries.
"The report ignores the interconnected nature of the euro area member states. A private-sector debt restructuring would have certainly risked systemic contagion," he added.
According to O'Connor, the objective of the 2010 Greek rescue was stabilisation "so as to ensure that Greece remained in the euro area.” "These aims were shared by all the troika institutions and Greek government ... and they continue to be valid today," he said.
The Commission will in due course publish its own report, O'Connor said, without giving further details.
In a separate briefing, European Central Bank President Mario Draghi said the IMF's remarks should be considered, but appeared to distance the bank from the IMF’s position that upfront restructuring of Greek debt in 2010 would have been desirable.
"If the IMF decides to do a mea culpa, identifies mistakes that have been made, we have to take this into account in the future," he said. "Often ... you judge what happened yesterday with today's eyes. It's always very hard to make ex-post judgments," he said.
The latest exchanges reflect growing EU-IMF differences over how to handle the debt crisis which has pushed the eurozone deep into recession. The IMF, initially a supporter of tough austerity policies to stabilise government finances, has increasingly put the emphasis on growth and flexibility.