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IMF: Bailout Fund Should Be Used To Bolster Market Confidence
WASHINGTON (Dow Jones)--The European Union needs to ensure that its emergency bailout program "has sufficient resources and can deploy them in a flexible manner to provide effective support" and to reassure skittish markets, an International Monetary Fund spokesman said Thursday.
"Whether this is achieved by raising the overall level of resources or making more effective use of existing ones is a matter for the Europeans," David Hawley said in a regular press briefing.
Although opposed by Germany, U.S. and E.U. officials are pressing for the European Financial Stability Facility to be used prior to a country's loss of market access for sovereign-debt financing. One proposal is to allow the EFSF to be used to buy a country's bonds before a crisis.
The IMF's Managing Director Dominique Strauss-Kahn was recently in Berlin, but the IMF declined to elaborate on the details of his message to German officials.
Although recent Spanish and Portuguese bond auctions aimed at rolling over some of the government debt due in coming months went better than expected, continuing high yields reveal concerns that the two countries may need to tap the bailout.
One IMF option could be the use of a new lending facility called the precautionary credit line, that would allow a country that has relatively sound fiscal policies in place to potentially avert the need for a post-crisis bailout. Hawley declined to say whether any countries had applied for a PCL.
Separately, the IMF spokesman said the interest rate on Ireland's emergency IMF loan would likely fall as a result of one part of the fund's governance restructuring. The IMF is in the process of applying a new calculus on each member countries' contribution to the fund. The new math will adjust Ireland's interest rate down, but the spokesman couldn't give an exact figure.
Hawley reiterated that it wasn't in Greece's interest to restructure its debt, as many market analysts and economists expect is inevitable. Rather, the IMF would support an extension of IMF loans.
The spokesman also said that economic pressure was building in the region around Tunisia after the political crisis. "While the region's oil-importing countries have only seen a relatively mild slowdown in growth in the past year...this growth rate is below the level required to create sufficient jobs to absorb new entrants to the labor market," Hawley said.
"High unemployment is a long-standing but increasingly urgent economic challenge," he said.
WASHINGTON (Dow Jones)--The European Union needs to ensure that its emergency bailout program "has sufficient resources and can deploy them in a flexible manner to provide effective support" and to reassure skittish markets, an International Monetary Fund spokesman said Thursday.
"Whether this is achieved by raising the overall level of resources or making more effective use of existing ones is a matter for the Europeans," David Hawley said in a regular press briefing.
Although opposed by Germany, U.S. and E.U. officials are pressing for the European Financial Stability Facility to be used prior to a country's loss of market access for sovereign-debt financing. One proposal is to allow the EFSF to be used to buy a country's bonds before a crisis.
The IMF's Managing Director Dominique Strauss-Kahn was recently in Berlin, but the IMF declined to elaborate on the details of his message to German officials.
Although recent Spanish and Portuguese bond auctions aimed at rolling over some of the government debt due in coming months went better than expected, continuing high yields reveal concerns that the two countries may need to tap the bailout.
One IMF option could be the use of a new lending facility called the precautionary credit line, that would allow a country that has relatively sound fiscal policies in place to potentially avert the need for a post-crisis bailout. Hawley declined to say whether any countries had applied for a PCL.
Separately, the IMF spokesman said the interest rate on Ireland's emergency IMF loan would likely fall as a result of one part of the fund's governance restructuring. The IMF is in the process of applying a new calculus on each member countries' contribution to the fund. The new math will adjust Ireland's interest rate down, but the spokesman couldn't give an exact figure.
Hawley reiterated that it wasn't in Greece's interest to restructure its debt, as many market analysts and economists expect is inevitable. Rather, the IMF would support an extension of IMF loans.
The spokesman also said that economic pressure was building in the region around Tunisia after the political crisis. "While the region's oil-importing countries have only seen a relatively mild slowdown in growth in the past year...this growth rate is below the level required to create sufficient jobs to absorb new entrants to the labor market," Hawley said.
"High unemployment is a long-standing but increasingly urgent economic challenge," he said.
