Newly-appointed IMF chief prepares to enter an economic battleground
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STEVE CHIOTAKIS: We await the decision of the Greek parliament — the Vouli — on big budget cuts there. Voting is going on right now — they’re tabulating as we speak measures that’re required for international help in the country’s debt crisis. But a lot of Greeks aren’t happy about the cuts. Street protests and rioting continue right outside of the parliament building in Athens. The Greek debt crisis is overshadowing most global economic news this morning.
Which is probably not the welcome French finance minister Christine Lagarde had in mind when she accepted the job as the new International Monetary Fund chief. She takes over next week.
Marketplace’s Stephen Beard is with us live from London with the latest on that. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: How does Lagarde and the changes at the IMF impact what’s going on in Greece?
BEARD: It’s very difficult to say because we really are entering new territory now. We’re still on the brink of what could be a game-changing event if the Greek parliament fails to approve this package of austerity measures in two votes — today and tomorrow — Lagarde and the EU will have to decide whether to carry through their threat to withhold any more of the bailout money from Greece. This will be a very tricky decision because they don’t want to let Greece off the hook, but they don’t want to trigger a disorderly default either.
CHIOTAKIS: Lagarde, Stephen, is what you might call the old guard. She’s the French Finance Minister. But does that mean she’s going to be better suited to tackle the European debt crisis?
BEARD: Well, she’s a European political heavyweight. She can knock heads together in Europe better than an outsider. She has empathy with European leaders, but Eswar Prasad of the Brookings Institution says that empathy may not play too well in the rest of the world outside Europe.
ESWAR PRASAD: There is a danger that it could be seen as favoritism rather than technically minded decisions and that would not serve either the Europeans or the IMF in the long-run.
And Lagarde is going to have to look very carefully over her shoulder at the IMF’s biggest donor — the U.S. She’ll have to be very careful that her actions are not perceived in the U.S. as throwing American tax payers money into the black-hole of Greece’s public finances.
CHIOTAKIS: Marketplace’s Stephen Beard, reporting from London. Stephen, thank you.
BEARD: OK Steve.
JEREMY HOBSON: China this morning expressed support for French Finance Minister Christine Lagarde — who will become the new head of the International Monetary Fund next week. That’s important because China is an emerging economy and emerging economies were hoping one of their own would be the new IMF chief. Lagarde will start her new role with one thing on her mind: the Greek Debt Crisis.
And that’s where we’ll start this morning with Marketplace’s European Correspondent Stephen Beard who joins us live. Stephen — how does this new IMF chief change the dynamic when it comes to Greece?
STEPHEN BEARD: It’s very difficult to say because we’re on the brink of what would be a game-changing event. If the Greek parliament fails to approve this package of austerity measure today and tomorrow, Lagarde and the EU will have to decide whether to carry through their threat to withhold anymore bailout money from Greece. That’s going to be a very tricky decision because it could trigger a Greek default and that could cause another major financial meltdown.
HOBSON: And Stephen, what about the fact that Lagarde is from western Europe and not from an emerging economy?
BEARD: It’s a double-edge sword, that. I mean on the one hand she’s a European political heavyweight. She can knock heads together in Europe better than an outsider. And she has empathy with European leaders.
But Eswar Prasad of the Brookings Institution says that empathy may not play too well in the rest of the world outside Europe.
ESWAR PRASAD: There is a danger that it could be seen as favoritism rather than technically-minded decisions. And that would not serve the Europeans or the IMF in the long-run.
Lagarde is going to have to look very carefully over her shoulder at the IMF’s biggest donor, the U.S. She’s going to have to worry that her actions at the IMF are not perceived in the U.S. as throwing good money after bad for the sake of Europe.
HOBSON: Marketplace’s Stephen Beard in London, thanks Stephen.
BEARD: OK Jeremy.
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