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After Eurogroup and ahead of Ecofin
30.11.2011
The Eurogroup meeting yesterday largely met market expectations by approving the long awaited 6th financial aid tranche for Greece and providing more details about the measures to boost the firepower of the EFSF facility. Media reports suggested that the overall amount of the EFSF leverage may fall well short of the initially anticipated EUR 1tn. We doubt that this came as a huge negative surprise given the recent escalation of the Italian and Spanish funding costs as well as earlier indications by various euro zone officials that the first loss guarantee provided by the bailout facility will have to increased to close to 30%, effectively reducing the facility’s leverage.
What we found encouraging was the confirmation during the press conference after the meeting that the euro zone finance ministers are considering greater role for both the ECB and the IMF in the rescue effort. This could revive earlier plans for loans by the ECB to the IMF which will then translate into IMF loans to fiscally weak euro zone members. The alternative to that would be to extend the resources available to the IMF by potentially increasing the role played by some EM. If confirmed, this could imply a sharp turnaround for the European politicians who were quoted at the G20 meeting earlier this month that the IMF has sufficient resources
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