Greek economy shrinks further, EU hits back at IMF over bailout

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Greek economy shrinks further, EU hits back at IMF over bailout

Greek economy shrinks further, EU hits back at IMF over bailout
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Greece’s economy continues to contract. It shrank 5.6 percent between January and March from the same period last year.

It was the 19th straight quarter of decline and followed a 5.7 percent slump in the fourth quarter of 2012.

Greece is stuck in a spiral of falling consumption and investment.

Athens has blamed the austerity measures forced on it by the European Union and the International Monetary Fund in return for a bailout to stop the country going bankrupt.

A war of words has now broken out between Brussels and the IMF over that rescue.

After the IMF said it was poorly handled, EU Economic and Monetary Affairs Commissioner Olli Rehn hit back calling that revisionist history. He said: “I don’t think it’s fair and just that (the IMF) is trying to wash its hands and throw dirty water on European shoulders.”

The IMF had blamed the eurozone for allowing Athens to delay restructuring its debts until 2012.

“I recall that the IMF’s managing director Dominique Strauss-Kahn did not propose early debt restructuring, (and that) Christine Lagarde was opposed to it,” Olli Rehn told Reuters on the sidelines of a seminar in Helsinki.

Lagarde, who was then French finance minister, replaced Strauss-Kahn as head of the Fund in 2011.

The European Commission – which with the IMF and European Central Bank forms the “troika” that prepared aid packages for Greece, Ireland, Portugal, Spain and Cyprus – has said undertaking a restructuring in 2010 would have been wrong.

On Thursday, European Central Bank President Mario Draghi also warned against judging “what happened yesterday with today’s eyes”.

The IMF published its view in an assessment of the Greek rescue late on Wednesday. It also admitted it had lowered its normal standards for debt sustainability to take part in the 110 billion euro bailout – the first of two for Greece – and that its projections for the Greek economy had been too optimistic.