Thursday, 14 June 2012

IMF Reiterates No Plans to Fund Financing for Spain, Only Monitoring

WASHINGTON--The International Monetary Fund has no plans to provide any financing for Spain, only to take a monitoring role in a EUR100 billion European bailout for the country's banks, an IMF official reiterated Thursday.
But IMF spokesman Gerry Rice repeated that the fund believes Europe should use its emergency bailout funds to take direct stakes in ailing banks as opposed to lending to governments, which then uses the cash to recapitalize banks. Otherwise, Europe risks boosting governments debt burdens and pushing borrowing costs higher.
The IMF's point has been highlighted in recent days as Germany's opposition to use euro funds for bank bailouts has fueled market concerns that Spain's bailout will mean Madrid will be unable to pay its obligations, pushing its borrowing costs to unsustainable levels.
Asked if Europe it's facing its last chance to fix the crisis at two upcoming euro summits in June--as some economists believe-- Mr. Rice said IMF Managing Director Christine Lagarde has repeatedly warned Europe of the urgency of prompt action on a comprehensive crisis plan. The IMF has said the E.U. needs to strengthen the capacity of its bailout funds, spur growth through looser monetary policy and tweaking budget-tightening plans, and creating a banking union.
Mr. Rice also said the IMF would warn world leaders at an upcoming summit of the Group of 20 largest industrialized and developing countries of the downside risks the global economy from a worsening of the euro zone crisis. He said the fund is hoping the G-20 firms up commitments to boost IMF resources, as tentatively promised earlier this year when IMF members pledged to raise more than $430 billion in new lending resources for the fund.
Officials from some key emerging economies, including China and Brazil, have indicated they may delay detailing any possible IMF cash commitments over concerns about the pace of IMF governance reform that would give them greater power within the fund.
Despite those remarks, Mr. Rice said there had been "no backtracking or delay" on new resource commitments, and "it was never expected that the package would be completed with every detail by" the G-20 meeting early next week.
The IMF spokesman also said there had been no request for financial assistance from Cyprus, despite some economist expectations that the country may soon need external financial support. 

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