Tuesday, October 25, 2011
IMF considering participation in EU bailout fund
The International Monetary Fund is considering taking part in a special investment vehicle being proposed by the euro zone bailout fund but has not made a decision yet, euro zone officials said today.
"The IMF has indicated that they are considering it - they have not taken a position," one euro zone official said. "It will all depend on the whole package."
Euro zone leaders are expected to approve a plan on Wednesday to increase the fire power of the European Financial Stability Facility, a 440 billion euro bailout fund, without euro zone countries having to put more money into it.
Under the plan, the EFSF would create a special purpose investment vehicle (SPIV) which would issue debt and use the proceeds to buy bonds of distressed euro zone sovereigns on the secondary market or extend loans to at-risk governments.
The SPIV would be open to private capital, sovereign wealth funds and the IMF to add their funds, according to the proposal seen by Reuters.
"The IMF is a possibility - they could be one of the investors, they could be the host of this fund," a second euro zone source said.
"They have not agreed yet, but they have not ruled out this possibility. We have to define it better - there would have to be a political agreement that this is something we would like to do and then we could talk with the IMF and the others," the second official said.
A third official said the IMF was ready to set up an administrative account for the EFSF with the Washington-based international institution. IMF shareholders and possibly sovereign wealth funds could put money into the account to help the euro zone.
Such a move would probably be easier and quicker than creating an SPIV and would provide more flexibility.
The third source said there were talks between the head of the IMF, Christine Lagarde, and European Union leaders about this technical option to raise money for the EFSF. Lagarde was until four months ago France's economy minister.
"An administrative account based at the IMF could be created easily since it will need only the IMF board approval to start, then it could act quickly and with little involvement of the IMF board provided it follows the guidelines given by the contributors," the third official said.
"The IMF has indicated that they are considering it - they have not taken a position," one euro zone official said. "It will all depend on the whole package."
Euro zone leaders are expected to approve a plan on Wednesday to increase the fire power of the European Financial Stability Facility, a 440 billion euro bailout fund, without euro zone countries having to put more money into it.
Under the plan, the EFSF would create a special purpose investment vehicle (SPIV) which would issue debt and use the proceeds to buy bonds of distressed euro zone sovereigns on the secondary market or extend loans to at-risk governments.
The SPIV would be open to private capital, sovereign wealth funds and the IMF to add their funds, according to the proposal seen by Reuters.
"The IMF is a possibility - they could be one of the investors, they could be the host of this fund," a second euro zone source said.
"They have not agreed yet, but they have not ruled out this possibility. We have to define it better - there would have to be a political agreement that this is something we would like to do and then we could talk with the IMF and the others," the second official said.
A third official said the IMF was ready to set up an administrative account for the EFSF with the Washington-based international institution. IMF shareholders and possibly sovereign wealth funds could put money into the account to help the euro zone.
Such a move would probably be easier and quicker than creating an SPIV and would provide more flexibility.
The third source said there were talks between the head of the IMF, Christine Lagarde, and European Union leaders about this technical option to raise money for the EFSF. Lagarde was until four months ago France's economy minister.
"An administrative account based at the IMF could be created easily since it will need only the IMF board approval to start, then it could act quickly and with little involvement of the IMF board provided it follows the guidelines given by the contributors," the third official said.
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