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Dominique Strauss-Kahn, Tim Geithner, and Ireland

Timothy Geithner and Dominique Strauss-Kahn seem a million miles apart this month, but they’re both connected by one issue: Ireland.

It’s been a bad two weeks for Ireland and Dominique Strauss-Kahn hasn’t helped. The IMF chief has left the bailout discussions if not rudderless then wrongfooted.

Meanwhile, it has emerged last week that Ireland’s cause was even more fatally damaged by none other than Timothy Geithner in a move that, at the time, undermined all the best efforts of Strauss-Kahn’s IMF.

The revelation came in an opinion piece by economist Morgan Kelly in The Irish Times. Kelly is famous for having predicted the bursting of the Irish property bubble and for having been profiled by Michael Lewis in Vanity Fair.

In a piece otherwise about how Ireland should default now and get it over with, Kelly claimed that, having been forced into taking an ill-advised bailout by an inept central bank governor, Ireland’s then finance minister, Brian Lenihan, had been offered by the IMF a plan to haircut €30 billion of unguaranteed bonds by two-thirds.

Kelly takes up the tale: “At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.”

In all this, according to Kelly, the IMF had been acting in Ireland’s best interests. If it had any intention of doing so again, the chaos following DSK’s arrest will surely mean another round of tough negotiations for the Irish.