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.)