The board of the International Monetary Fund will decide on the size of its contribution to the enhanced bailout deal for Greece "in the second week of March," IMF Managing Director Christine Lagarde said Tuesday, Feb 21.
The Wall Street Journal reports that at a press conference in the small hours after a grueling 12-hour meeting, Ms. Lagarde said that it was premature to speculate on the board's decision. Unconfirmed reports circulating before the meeting had suggested that the fund wanted to cut its contribution by 50% or more, after shouldering 30% of the original bailout deal negotiated in spring 2010.
Ms. Lagarde said that the IMF would be closely following Greece's implementation of prior commitments, as well as following Europe's progress in strengthening its "firewalls" to contain the crisis.
The euro zone is due to discuss an increase in the size of the €500 billion ($662.1 billion) European Stability Mechanism at a summit meeting March 1 and 2. Germany, the region's main paymaster, has so far resisted pressure to put more of its taxpayers' money at risk, but many of the IMF's non-European membership have expressed reluctance to lend any more to euro-zone countries until the euro zone does more to help itself.
EU Monetary Affairs Commissioner Olli Rehn, speaking at the same press conference, said that as an interim measure, it should be possible to run the ESM and the euro zone's temporary bailout vehicle, the European Financial Stability Facility, concurrently until the EFSF's mandate expires in 2013. The 17 euro-zone countries have already agreed in principle to launch the ESM by the middle of this year, one year earlier than planned.
Ms. Lagarde's task of selling the deal to her board has been made easier by the fact that the final agreement assumes only a fractionally higher debt level for Greece in 2020 than the original deal struck in October: 120.5% of gross domestic product. Various reports before the meeting had suggested that even this was viewed as unsustainable within the fund.
