Not our problem

IMF's parental threat may help euro kids grow up

The International Monetary Fund (IMF) had no real business in Greece in the first place. The global lender is supposed to help countries which are needier and more cooperative. But as the euro zone proved too immature to solve Greece's inability to service its debts, the IMF stepped in. After five years as adult in the room, it now wants out, unless both sides start to behave sensibly. That parental threat ought to help the euro kids grow up.

The negotiations on a third Greek bailout are taking place in private, with leaks. The Financial Times obtained the minutes of an IMF board meeting in which the staff declared the country ineligible for credit beyond the current euro 21.2 billion exposure. A firm stand will please poorer members of the IMF, which must wonder why the institution was so committed to a middle-income member of the richest multinational grouping in the world, the European Union.

The refusal to participate creates political ructions in Europe, though. Both the Germans and Greeks want the IMF imprimatur on any deal, but neither side is quite mature enough to admit the obvious facts of economic life. Berlin rejects the IMF command to write off debts which in practice cannot ever be repaid, while the IMF staff conclude that Athens has not shown the "institutional and political capacity" to carry out needed reforms.

The IMF has not always been the best tutor of wayward nations. However, this time around it has done more good than harm, by consistently focusing on practical reforms and realistic finance. The latest threat not to participate is clever, because it is credible enough to help the two sides act realistically as the August 20 deadline for an agreement looms. A barely acceptable muddle can probably be found.

After that, there will be time for a rethink at the IMF. The managing directors during the crisis, Dominique Strauss-Kahn and Christine Lagarde, are both European politicians who want the euro zone to thrive. But the Fund cannot be so parochial forever. More good can be done further afield. If adult thinking prevails, the third Greek bailout is likely to be the IMF's last.