Germany, France Back IMF in Aiding Greece, Official Says
Comment of the Day

March 23 2010

Commentary by David Fuller

Germany, France Back IMF in Aiding Greece, Official Says

Here is the opening from Bloomberg's report today
March 23 (Bloomberg) -- Germany and France have agreed that the International Monetary Fund should be involved in any aid package for debt-burdened Greece, a German Finance Ministry official told reports today in Berlin.

The agreement could lead to progress on a European Union agreement to help Greece finance the region's biggest budget deficit at a summit of EU leaders March 25-26. Franck Louvrier, a spokesman for French President Nicolas Sarkozy, wasn't immediately available to comment.

The shift toward an IMF role comes just one week after euro-region finance ministers agreed to a European framework for any bailout. German Chancellor Angela Merkel, who insists that German taxpayers shouldn't pay for Greece's excess, then started a drive for greater IMF involvement. That shift initially put her at odds with Sarkozy whose government pushed for a European solution.

"It seems like a U-turn but it's a sensible solution," said Julian Callow Chief European Economist for Barclays Capital in London. "The IMF brings credibility and transparency and anything that gives investors a degree of comfort is good. The situation has been from the outset that there is no European mechanism in place to deal with a situation like this. This is what the IMF is there for."

David Fuller's view This is a sensible step in my opinion, but how will it affect the markets?

Positively, because it ends a degree of uncertainty, which markets do not like, and will reduce ineffective squabbling within Euroland. Stock markets are beneficiaries because they are already in form. I would not be surprised if the euro steadied before long, as well. (See also my more detailed assessment in the lead item above.)

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