IMF to Set Terms for Greece Aid, Strauss-Kahn Says (Update1)
By Agnes Lovasz
March 30 (Bloomberg) -- The International Monetary Fund would determine terms of assistance it provides Greece, Managing Director Dominique Strauss-Kahn said, underlining concerns some European leaders have expressed over the lender’s participation in a possible rescue.
Leaders of the 16-nation euro region last week endorsed a combination of IMF and bilateral loans at market interest rates should Greece run out of fund-raising options, while saying they would maintain control over the process.
Any Greek package would “be an IMF program decided by the IMF as it happens with each and every country,” Strauss-Kahn said in an interview on a flight to Bucharest from Warsaw today. “The IMF will define the conditionality, as we do with any country.”
Strauss-Kahn’s comments came after some European leaders expressed a preference for an exclusively EU effort. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the panel of euro-area finance ministers, said last week that he “would have preferred” a “purely European” plan. European Central Bank President Jean-Claude Trichet he was “extraordinarily happy” that European governments had forged a plan to aid Greece.
Previously, the central bank chief said ceding control of the aid to the IMF would be “very, very bad.”
ECB Governing Council member Jozef Makuch said today IMF involvement in a Greek rescue is unlikely to be invoked.
‘Last Resort’
“An IMF involvement in solving the situation in Greece is not on the agenda. It is meant as a last-resort solution,” Makuch, who heads the Slovakian central bank, told reporters in Bratislava today. “Neither the ECB nor Greece expect that IMF involvement will be needed.”
By accepting an IMF role, the euro-area leaders bowed to German Chancellor Angela Merkel’s insistence that up to half of any loans for Greece come from the Washington-based lender of last resort.
Greece, battling the European Union’s highest budget deficit, sold 5 billion euros ($6.7 billion) of a new seven-year bond yesterday, testing investors’ confidence in the EU aid pledge. The notes fell in the first trading day, with the yield rising to 6.30 percent from an issue yield of 6 percent.
The sale took care of all of Greece’s funding needs for April, Petros Christodoulou, head of the nation’s debt agency, said yesterday.
Strauss-Kahn said the IMF won’t get involved until Greece asks it for assistance.
Possible Request
“If, and it’s a big if, Greece asks for support, we will provide support for Greece as one of our members, as we do with any other member,” he said in the interview.
He said in Warsaw yesterday Greece might be able to solve its financing problems alone in the markets, and “hopefully” won’t need the IMF. The IMF has “no role” in a possible rescue for Greece until the country requests a loan program from the Washington-based fund.
“There’s no step” to be taken by the IMF at the moment, Strauss-Kahn said in the interview. “Everything is in the hands of the Greeks, not in our hand. We never go to a country and say you need a program, it’s always the other way around. Until a country comes to us, we have no role, and it’s the same for Greece.”
He declined to speculate on how much money Greece may be able to borrow. It will be a multiple of the country’s IMF quota, which will depend on the fund’s assessment of the country’s needs, he said.
The Greek government is counting on wage cuts and tax increases to shave its budget deficit to 8.7 percent of gross domestic product this year from 12.7 percent in 2009, the highest in the euro’s 11-year history.
“It seems to be the right thing to do,” Strauss-Kahn said, adding that he currently wasn’t in a position to predict if any additional measures will be needed.
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