The FINANCIAL -- The board of the
International Monetary Fund will decide on the size of its contribution
to the enhanced bailout deal for Greece "in the second week of March,"
IMF Managing Director Christine Lagarde said Tuesday.
According to London Stock Exchange, at a press conference in the small hours after a gruelling 12-hour meeting, Lagarde said that it was premature to speculate on the board's decision. Unconfirmed reports circulating before the meeting had suggested that the fund wanted to cut its contribution by 50% or more, after shouldering 30% of the original bailout deal negotiated in spring 2010.
Lagarde said that the IMF would be closely following Greece's implementation of prior commitments, as well as following Europe's progress in strengthening its "firewalls" to contain the crisis.
The euro zone is due to discuss an increase in the size of the EUR500 billion European Stability Mechanism at a summit meeting March 1 and 2. Germany, the region's main paymaster, has so far resisted pressure to put more of its taxpayers' money at risk, but many of the IMF's non-European membership have expressed reluctance to lend any more to euro-zone countries until the euro zone does more to help itself.
EU Monetary Affairs Commissioner Olli Rehn, speaking at the same press conference, said that as an interim measure, it should be possible to run the ESM and the euro zone's temporary bailout vehicle, the European Financial Stability Facility, concurrently until the EFSF's mandate expires in 2013. The 17 euro-zone countries have already agreed in principle to launch the ESM by the middle of this year, one year earlier than planned.
Lagarde's task of selling the deal to her board has been made easier by the fact that the final agreement assumes only a fractionally higher debt level for Greece in 2020 than the original deal struck in October: 120.5% of gross domestic product. Various reports before the meeting had suggested that even this was viewed as unsustainable within the fund.
As reported, the creditors also managed to keep the overall amount of new financing required at the EUR130 billion agreed in October, by forcing private creditors to accept larger losses and by cutting the interest rates on the loans paid out under Greece's first bailout.
The agreement revolves around a debt exchange that will see private investors waive 53.5% of their principal, and trade their existing bonds for new bonds offering a coupon of 2% until 2014, 3% between 2015 and 2020, and 4.3% thereafter.
The deal will see Greece's debt as a proportion of gross domestic product lowered to 120.5% by 2020 from over 164% currently.
The Eurosystem's holdings of Greek debt have been exempted from any losses, Juncker said. Instead, the European Central Bank will disburse any profits it makes on the portfolio of bonds it holds under the Securities Markets Program--estimated at around EUR45 billion--"in line with the ECB's statutory profit distribution rules". In addition, national central banks in the euro zone will transfer to Greece any profits arising from those Greek bonds they hold as investments.
Rehn said there will also be permanent representatives of the troika--the ECB, International Monetary Fund, European Commission--on the ground in Greece to monitor the program, satisfying a key demand of the creditors.
Related Stories
