Friday, March 26, 2010

Roubini: Not Sure New I.M.F./Eurozone Greece Bailout Plan Makes Sense

Speaking with reference to Greece mixed "deal" announced yesterday, Nouriel Roubini was quoted as saying “I’m not sure if it makes sense” with regards to only provide support in case of an emergency, and that his worry is that "the EU may be imposing even more fiscal austerity than necessary,” Roubini confirms that that there should have been money offered right away.

He added:

“It’s a compromise between the German views where they wanted to have a greater role of the IMF in the support of Greece and the views of the rest of the euro zone, especially France, where they wanted a European solution,” “An IMF solution would have been a cleaner one because the IMF has the experience”. His declarations were made to Bloomberg TV.

The "plan" specified that:

  • Each euro-region country would provide non-subsidized loans to Greece based on its stake in the ECB.
  • Europe would provide more than half the loans
  • IMF would provide the rest (was the I.M.F. consulted?)
  • The plan would be triggered only if Greece runs out of fundraising options.

Roubini says that it would have made sense to frontload some support and provide loans below- market rates, “to make sure there isn’t a self-fulfilling refinancing crisis,”

“Even a country that does fiscal adjustment might have a refinancing problem, so you need to have a meaningful amount of money on the table.”

Because the I.M.F is involved “in the game,” European leaders have “essentially given final veto power for any financial aid to Germany,”

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