The IMF Will Contribute Less than One-Third of Greek Rescue
July 29th, 2011
The U.S. newspaper The Wall Street Journal said last week that the IMF is concerned about its huge long-term exposure to the euro, reminding that the institution has already pledged to provide 78,500 million euros for Greece, Ireland and Portugal until 2014, a figure higher than the participation of these struggling countries, and a “growing source of concern among its members.”
After the first Greek rescue in May 2010, the fund said it would contribute a dollar for every two loaned by the euro zone to other countries in the monetary union having problems. Therefore, the euro zone authorities assumed that in the negotiations of the new bailout for Greece that the IMF would continue to contribute one-third of the funding.
However, according to sources contacted by the American publication, the IMF has indicated it is unlikely to continue with this formula in the new rescue. “It almost certainly will not be a third,” they have said.
The Greek debt sustainability is still a concern among the IMF chiefs, despite the new bailout fund, which could provide funding worth around 160,000 million euros to Greece over the next three years. Specifically, on Thursday the euro zone countries pledged to provide 109,000 million euros until 2014.
The IMF contributed 30,000 million euros (27% of the total) to the first aid package to Greece, and promised to contribute a third of the cost of other rescues, as it did in the bailouts of Ireland and Portugal.
However, its commitment to Greece exceeds by 27 times the participation of Greece in the IMF and this contribution would increase significantly with the new program, yet to be defined. In the same manner, in the case of Ireland it exceeds by 18 times its contribution to the fund, and Portugal by 25 times.