PARIS – In early 2010, a group of men (and a few women) in dark suits landed in Athens. They belonged to a global institution, the International Monetary Fund, and to a pair of regional ones, the European Commission and the European Central Bank. Their mission was to negotiate the terms and conditions of a financial bailout of Greece. A few months later, what became known as the “troika” was dispatched to Ireland, then to Portugal, and later to Cyprus.
This endeavor was bound to have wide implications. The troika negotiated what ended up being the largest financial assistance packages ever: loans to Greece from the IMF and European partners are set to reach €240 billion ($310 billion), or 130% of the country’s 2013 GDP – far more in both absolute and relative terms than any country has ever received. Loans to Ireland (€85 billion) and Portugal (€78 billion) are also significantly bigger than those usually provided by the IMF.
Moreover, cooperation between the three institutions is unprecedented. Back in 1997-1998, during the Asian crisis, the G-7 flatly rejected Japan’s proposal for an Asian Monetary Fund. Now the IMF has even accepted a minority-lender role, with the bulk of assistance coming from the European Stability Mechanism (ESM), a new institution often viewed as an embryonic European Monetary Fund.
It is frequently argued that the size of the assistance packages is a testament to Europe’s clout within the IMF. Perhaps, but the packages are, first and foremost, a consequence of the constraints to which Europeans were (and still are) subject.