Wall Street Journal
October 5, 2011
The International Monetary Fund could create a special financing tool to buy bonds in private markets as a way to help stem the euro zone's debt crisis, a senior IMF official said Wednesday.
However, Antonio Borges, head of the IMF's Europe Department, said the idea hadn't yet been vetted by the fund's membership and there have been no formal requests from euro-zone members for additional financing.
Such a plan could aid countries such as Spain and Italy, which face rising costs for financing in capital markets. Mr. Borges said these countries have a problem of market confidence rather than solvency. IMF bond-buying interventions could help solve that problem, he said. The IMF's involvement in euro-zone secondary bond market purchases would give an "additional element of credibility because of the conditionality the IMF requires," he said.
Mr. Borges said the idea is for the fund to create a special purpose vehicle to buy bonds under stress in secondary and primary markets.
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