The arrest of International Monetary Fund chief Dominique Strauss-Kahn has sent shock waves through Europe as it continues to deal with the euro debt crisis.
Strauss-Kahn was supposed to be in Brussels on Monday for an important meeting to discuss a possible further 60 billion euro bailout for Greece. He strongly supported policies that would help Greece avoid restructuring its massive public debt.
The IMF's managing director wanted to give Greece, Portugal and Ireland the time needed to put their accounts in order, and he also argued for softening the austerity measures associated with the bailouts for those countries.
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 "mad men."
Strauss-Kahn'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.
On Monday in Brussels, European Commission spokesman Amadeu Altafaj said there will be continuity of policies despite the absence of the IMF director.
"This should not impact on the programs for Greece and Ireland or the decisions about Portugal," Altafaj said. "I have seen alarmist headlines in the press, and I would like to reassure public opinion — there's absolutely no question that decisions which are under way will be affected."
Several commentators pointed out Monday 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 — amid a 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.
"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 played an absolutely central role in devising these programs, when ultimately the eurozone had to bring it in — that's going to go," Wolf said. "It's going to be really quite different without him."
The numbers released Monday in Brussels are not encouraging: Greek debt — already the biggest in the euro's history at 143 percent of gross domestic product 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.