The IMF played an important role in supporting the EU through the euro crisis – but this may have weakened Europe’s long-term influence.
In the past, Europeans made contributions to the IMF that were used mainly to support the developing world, but the euro crisis has made the EU itself increasingly reliant on the IMF. In 2011, the fund channelled billions of dollars to struggling European nations and its involvement gave the EU some much-needed credibility. Relations were not always easy: in August, IMF officials angered their European counterparts by circulating a study highlighting the vulnerability of EU banks. Against this background, European governments tried to maintain their traditional influence in the IMF. In 2011, they confirmed the details of a deal agreed the previous year to reduce their voting weight on the IMF board. However, they successfully ensured that managing director Dominique Strauss-Kahn was replaced by another European after he was arrested in New York in May and charged with sexual assault. But his successor, Christine Lagarde, gave away more top posts to Asian candidates and pointedly criticised EU policies.
Alongside officials from the European Commission and the ECB, IMF staff members participated in the teams that ruled on aid to Greece, Ireland and Portugal. Their presence made it easier to put pressure on local officials to meet their commitments, although Greece in particular struggled to do so. At the G20 summit in Cannes in November, Italy acquiesced to a proposal that the IMF should monitor its proposed financial reforms, underlining the fund’s role as a referee in the euro crisis. At the European Council meeting in Brussels in December, European leaders agreed to invest an additional €150 billion of their own money in the IMF to help it manage the crisis – although the UK refused to participate in this if the whole G20 did not engage. Towards the end of the year, the IMF and EU officials were also locked in contentious talks with the Orbán government over financial assistance to Hungary. The World Bank was less prominent in 2011, although its president, Robert Zoellick, underlined that the euro crisis could damage developing economies.