The International Monetary Fund is having a tough time these days. IMF chief Dominique Strauss-Kahn sits in the Rikers jail on a suicide watch after bail was denied in regards to his alleged sexual assault on a maid of the Sofitel Hotel in New York City this past Saturday. Strauss-Kahn is a popular politician in France, considered a contender to challenge Nicolas Sarkozy for the job as president. Many question why he was staying in a $3,000 a night room while the IMF preaches austerity to many countries, especially Greece. Today, the IMF warns Greece to get serious about financial and budget reforms. The sovereign debt crisis as overwhelmed Greece, but after some initial reforms, followed by weeks of sometimes violent protests and strikes, the Greeks are considering other options, including going off the Euro and printing their own currency.
Strauss-Kahn has played a role in the IMF cooperation with the European Central Bank, ECB, in structuring bailouts of nations like Greece, Spain, Ireland and Portugal. Greece received 110 Billion Euros, about $170 Billion dollars, as part of the ECB-IMF bailout. While Greece has slashed its prior budget deficits, the IMF estimates that the target goal of 7.6% of GDP will not be met. That the budget deficit for Greece will stay at or above 10% this fiscal year.
Needless to say, just at a time when the International Monetary Fund is in crucial negotiations over the financial health of the European Union, the scandal of IMF director Dominique Strauss-Kahn is untimely to say the least. Pressure for him to step down as he sits in Rikers jail under a suicide watch is countered by outrage from France over his treatment by U.S. authorities. In particular, the so-called public ‘perp-walk’ where Strauss-Kahn was photographed handcuffed. The French do not appreciate this treatment to a key player in the Socialist party who was planning to run against Nicolas Sarkozy. How effective will the IMF now be in dealing with Greece and other countries facing debt crises is debatable. Clearly a firmer hand is needed, requiring Strauss-Kahn to resign as soon as possible.