An independent probe has found the IMF bent its own rules to deliver European bailouts.

The International Monetary Fund’s Independent Evaluation Office reports that as the EU plunged into financial crisis, the Fund’s executive board made poorly-informed decision with too little oversight, taking a big toll on the Fund’s resources.

It suggested the IMF had underestimated the risks in the European economy and over-estimated its ability to handle problems.

The reviewers were sometimes blunt in their criticism that the Fund had given up its independence and objectivity after joining the bailout “Troika” with the ECB and EC.

“The IMF was kept on the sidelines in late 2009 and early 2010 when approaches to dealing with the developing crisis in Greece were being debated in Europe,” the report said.

“By the time the IMF was invited to provide its expertise and financing in late March 2010, the option of debt restructuring at the program’s outset was off the table.”

After the first bailouts failed, debt restructuring was required, and has been hinted at again for Greece’s debt load ahead of a third rescue program.

The review found IMF management loaned Greece more than normally permitted, in a decision rushed through the executive board with little discussion and understanding.

“Weaknesses in the decision-making process created the perception that the IMF treated Europe differently. The procedure used for Greece was essentially repeated for Ireland and Portugal,” it said.

By joining the Troika, “the IMF lost its characteristic agility as a crisis manager. The IMF supported programs in Greece and Portugal incorporated overly optimistic growth projections; lessons from past crises were not always applied”, the IEO said.

“At the euro area level, IMF staff’s position was often too close to the official line of European officials, and the IMF lost effectiveness as an independent assessor.

 “IMF management and staff, having decided not to push for debt restructuring for Greece, did not make a case for it when the program’s likelihood of success increasingly came into doubt, starting from the fall of 2010.”

While the report did not find that the Fund had bowed to political pressure, it did acknowledge the presence of such pressure, due in part to the “unusual” arrangement of the Troika institutions.

“The credibility of the IMF comes from the technical competence and independence of its staff, and the managing director must ensure that its technical work is protected from political influence.”

The full report is accessible here.