Greece's urgent plea for a €45bn lifeline to pull itself out of debt has overshadowed a meeting today of IMF finance ministers in Washington.
International Monetary Fund managing director Dominique Strauss-Kahn has promised that the IMF will ‘move expeditiously’ in response to Greece's appeal yesterday for help - the first ever from a eurozone nation.
‘We have been working closely with the Greek authorities for some weeks on technical assistance, and have had a mission on the ground in Athens for a few days working with the authorities and the European Union,’ he said.
The stability of the euro is at stake as Greece wrestles with a debt of €300bn and Europe creeps out of recession.
Divisions within the Group of 20 rich and developing nations over a worldwide tax on banks to claw back the cost of bailing out financial institutions will also loom over the day-long conclave.
The spring meeting of the IMF is taking place against the backdrop of what the G20 yesterday portrayed as a better-than-expected global economic recovery, led by Brazil, China and India.
‘The global recovery has progressed better than previously anticipated largely due to the G20's unprecedented and concerted policy effort,’ a statement released after the meeting said.
‘We should all elaborate credible exit strategies from extraordinary macroeconomic and financial support measures that are tailored to individual country circumstances.’
The Greek debt crisis is not on the public agenda for the day-long IMF meeting. But it loomed large over the proceedings that will also take stock of Haiti's reconstruction after its 12 January earthquake.
The EU has said it sees no ‘obstacles’ to Athens' request to activate a three-year joint EU-IMF debt rescue worth up to about €45bn in the first year at concessionary interest rates of about 5.0%.
Under a deal hammered out with EU leaders on 11 April, the IMF would cover a third of the cost of the bailout.
But German Chancellor Angela Merkel said the rescue package would be activated only if the euro's stability were threatened and if Athens implemented tough austerity measures.
Separately, the IMF finance ministers will hear a request from their G20 counterparts to weigh levying taxes on big banks to help stem risk and pay for possible financial failures.
In a statement yesterday, the G20 said it wants the financial sector to ‘make a fair and substantial contribution towards paying for any burdens associated with government interventions to repair the banking system’.
The IMF is expected to propose two taxes, one to reimburse governments for the cost of bailing out banks hit by the crisis and another to dissuade banks from taking excessive risks in the future.
‘It's a basic sense of fairness that we adopt that basic framework,’ said US Treasury Secretary Tim Geithner.
But some G20 member countries such as Brazil and Canada - who both have seats on the IMF's policy-setting international monetary and financial committee - have expressed opposition.
‘I would prefer to curb risk by demanding that banks maintain higher reserves,’ said Brazilian Finance Minister Guido Mantega.
‘The crisis did not originate in our financial systems.’
In its statement yesterday, the G20 called on the IMF to keep working on the issue ahead of a summit of G20 leaders in Toronto in June.
