The International Monetary Fund (IMF) has warned it may not have enough money to bail out larger eurozone countries if the debt crisis were to spread, the British Broadcasting Corporation (BBC) said in a report on Sunday.
The BBC quoted IMF chief Christine Lagarde as saying the global lender could meet its current obligations but this could change if the crisis worsened. Publicly, world leaders have said there is “no plan” for a Greek default. But reports suggested leaders were working on a plan to allow Greece to default on its debts and remain in the euro, said BBC.
It is believed that policymakers feel they need to concentrate on recapitalising banks and boosting the funds of the European Financial Stability Facility (EFSF). BBC business reporter Joe Lynam said the plan to increase the EFSF’s financial firepower could see the money available to bail out EU banks and member states rise from 440 billion euros ($596 billion) to about 2 trillion euros.
He added that the plan could also enable the European Central Bank (ECB) to buy more Italian and Spanish bonds to prevent those two countries needing a full bailout. Antonio Borges, the head of the IMF’s European department, urged the ECB to play a bigger role in fighting the crisis. “It is very important that we see a combination of the ECB and the EFSF,” Borges was quoted as saying.
“The ECB is the only agent that can really scare the markets.”
