Financial Times
January 25, 2012
The often taciturn International Monetary Fund has had a lot to say this week about the eurozone debt crisis. Christine Lagarde, its managing director, urged the eurozone on Monday to create a much bigger rescue fund for its troubled governments, holding out the prospect that the fund might seek to increase its own firepower in return.
On Wednesday she argued that if Greece’s private creditors did not accept a big enough writedown, the European Central Bank might have to take a reduction in its own Greek debt holdings. “The balance between the participation of the private and the public sector is a concerning question,” Ms Lagarde said.
The IMF insists that it is not pushing for any particular combination of private and public financing. Although the IMF has to sign off on any new bail-out for Greece in which it takes part, fund officials say that, following its rules on lending to debt-laden countries, it takes largely a technocratic rather than a micromanaging role. Its task is to point out the size of Greece’s external financing gap and then invite the private sector and the European authorities to work out their own ways to fill it, in order to hit a target ratio of Greek public debt to gross domestic product of 120 per cent by 2020.
The IMF said yesterday: “The fund has no view on the relative contribution of private sector involvement and official sector support in achieving this target. In line with this view, the IMF has not asked the ECB to play any specific role.”
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