Brazil calls for IMF eurozone rescue programmes revision

Brazil has called for the IMF-backed rescue programmes for Greece and other southern eurozone countries to be reviewed to make them more economically sustainable.

The call from finance minister Guido Mantega came as he sought to explain Brazil’s stance on Greece’s rescue programme after its IMF representative, Paulo Nogueira Batista, abstained from a vote to approve the latest tranche of help for Athens.

In an interview with the Financial Times on Thursday, Mr Mantega said Brazil believed the International Monetary Fund-backed eurozone programmes needed to be overhauled to make them more realistic. “I think these programmes of fiscal adjustment created by Europe in general are excessive, they are very stringent,” he said.
In an earlier statement the Brazilian finance minister had said that both he and Mr Batista were “of the view that the rescue programmes for Greece and other countries of the periphery of the euro area need to be revised and improved so as to provide better chances of recovery for these countries”.
The remarks came as Antonis Samaras, Greece’s prime minister, met with US President Barack Obama to discuss the state of Greece’s bailout, which the Fund’s latest report. has said is likely to need an additional €11bn in financing and more further big writedowns of its debts.
Following their meeting at the White House, Mr Obama praised Mr Samaras for his “bold and difficult action” and said the US would support Greece and its people so they can “see the light at the end of the tunnel”. But he added: “It’s important that we have a plan for fiscal consolidation to manage the debt, but it’s also important that growth and jobs are a focus.”
Mr Samaras expressed confidence that Greece would emerge from the crisis with a stronger economy, benefiting all of Europe. “We’ve gone through thick and thin. The sacrifices made by the Greek people are huge, but they’re not going to be in vain,” he said.
The decision by Mr Batista last week to abstain from an IMF board vote to approve a €1.8bn disbursement to Greece was seen by some as a sign of growing anxieties among developing economies over IMF support for Europe’s wealthy economies.
Mr Batista was appointed in 2007 as IMF executive director representing Brazil and 10 developing countries. He has frequently championed the cause of emerging markets at the Fund and has opposed the Greek programme, arguing it is poorly conceived, based on over-optimistic projections, and could result in Greece ultimately being unable to meet its obligations.
Mr Batista has claimed previously that his comments are made in his “personal capacity” but his position was undermined last week when Brazil suddenly sought to distance itself from a decision by the executive director to abstain from a vote supporting the latest IMF contribution to Greece.
Mr Mantega had said Brazil in fact supported the disbursements for the Greek programme, before denouncing Mr Batista’s abstention as unauthorised in a phone call with IMF managing director Christine Lagarde and recalling Mr Batista to Brasília to “explain himself”.
Mr Mantega said on Thursday that last week’s vote by Mr Batista had been the result of a “miscommunication” and that Brazil remained committed to the Greek bailout, which the IMF has joined the European Commission and European Central Bank in.
“I think you should improve the Greek programme but you still have to give the money, you have to approve the tranche,” Mr Mantega told the FT.

The comments represent a balancing act for Brazil, which has been a vocal critic of what it believes are Eurocentric IMF policies. Mr Mantega’s tough rhetoric on developed countries’ dominance of multilateral institutions has pleased hardliners in his government’s domestic support base, the centre-left Workers’ party.

But some analysts believe Mr Mantega may now be trying to soften Brazil’s earlier combative approach with the developed world on monetary and economic policy as its own economy weakens.

Mr Mantega had taken a strong stand against what he called the “currency wars”, characterised by the US Federal Reserve’s quantitative easing programme that the finance minister believes flooded emerging markets with unwanted hot money.

With commodity prices falling, however, Brazil’s trade balance is deteriorating, creating the need to attract funds from abroad to fill a growing current account deficit and fund its huge infrastructure programmes.

The current account deficit jumped to $44bn during the first half of this year from US$25bn a year ago.

ΠΗΓΗ: Financial Times