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The arrest of Dominique Strauss-Kahn has also come at a bad time for the eurozone, as it struggles to contain its growing debt crisis.
As NPR's Sylvia Poggioli reports, Strauss-Kahn had argued for softening the austerity measures associated with the bailouts of Greece, Ireland and Portugal.
SYLVIA POGGIOLI: Whatever may have really happened in that New York hotel room, the allegations have sent a shudder of fear through many European capitals. Strauss-Kahn was supposed to be in Brussels today for an important meeting to discuss a possible further 60 billion euro bailout for Greece. The French IMF managing director strongly supported policies that would help Greece avoid restructuring its massive public debt.
He wanted to give Greece, Portugal and Ireland the time needed to put their accounts in order. Greek economists say that under Strauss-Kahn's leadership, the IMF was a counterbalance to the strict austerity policies favored by Northern European leaders. In fact, according to the daily Le Monde, Strauss-Kahn is fond of calling those who argue for tighter austerity fous furieux, which roughly translates as madmen.
The French economist's view is that shock therapy measures, imposed on Greece and other European countries with sovereign debt crises, will lead only to economic recession and severe social unrest.
Today in Brussels, European Commission spokesman Amadeu Altafaj assured there will be continuity of policies despite the absence of the IMF director.
Mr. AMADEU ALTAFAJ (Spokesman, European Commission): (Through translator) This should not impact on the programs for Greece and Ireland or the decisions about Portugal. I have seen alarmist headlines in the press, and I would like to reassure public opinion that decisions which are under way will not be affected.
POGGIOLI: Several commentators pointed out today that at a time of turmoil in the eurozone and division among European leaders, it was the IMF, under Strauss-Kahn's leadership, that kept the eurozone's rescue strategy on track.
The Financial Times said that the IMF's single most important influence in the resolution of the eurozone crisis was political. In a situation of lack of political leadership, the paper said, the IMF filled a vacuum.
Martin Wolf, chief economics commentator of the Financial Times, said Strauss-Kahn's probable departure as IMF managing director will leave troubled eurozone economies without a champion.
Dr. MARTIN WOLF (Financial Times): Now, in the short term, it probably won't make much difference. But the role of the IMF as a shaper of the whole programs - it takes an absolutely central role in devising these programs, when ultimately the eurozone had to bring it in -that's going to go. It's going to be really quite different without him.
POGGIOLI: The numbers released today in Brussels are not encouraging: Greek debt - already the biggest in the euro's history, 143 percent of GDP last year - will surge further in the next two years. Portuguese debt for the first time will surpass the total economic output. And Irish debt is forecast to reach 112 percent this year.
The European Commission also predicts the economies of both Greece and Portugal will continue to shrink, as austerity measures choke growth needed to finance deficit reduction.
Sylvia Poggioli, NPR News.
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