There are so many aspects surrounding Greece’s ongoing refinancing needs still up in the air, it should come as no surprise that the agenda for Tuesday’s meeting of European finance ministers has reportedly been shrunk to addressing how an immediate €15bn gap can be bridged through to 2014. A further €17.6bn seemingly required to take the country through to 2016 can be discussed later. Read more
Ben Bernanke was over in Tokyo on Sunday at a BoJ-IMF seminar, explaining just how great QE in the developed economies was for the rest of the world.
It went something like this (emphasis ours): Read more
Angela Merkel is prepared to let the existing EFSF, which has about €250bn in unused funds, run in parallel with its successor, the €500bn ESM, says the FT, citing unnamed German and eurozone officials. In return, the German chancellor wants eurozone heads of government to sign up to rules to cut budget deficits and public debt that are much tougher than those currently foreseen by eurozone governments. The German offer emerged as Christine Lagarde, the IMF head who met Ms Merkel on Sunday, pressed Berlin for “a clear and credible timetable” to fold the existing EFSF into the ESM to increase its size. Without a larger bail-out fund, fundamentally solvent countries like Italy and Spain could be forced into a financing crisis, Ms Lagarde said in a speech in Berlin. “This would have disastrous implications for systemic stability,” she said. Read more
The IMF has asked its member countries for an extra $500bn in firepower to combat the world’s spreading fiscal emergencies, which it estimates will generate demand for bail-out loans totalling $1tn over the next two years. The FT, citing people familiar with the discussions, says the estimate was presented by Christine Lagarde to the fund’s executive board this week, and would most likely be financed by voluntary ad hoc loans rather than mandatory contributions. The IMF currently has $387bn in available resources. Eurozone countries last month pledged about $200bn to the IMF, which will count towards the new goal. But with the US unwilling to contributeand the UK reluctant, much of the remaining commitments will have to come from large developing countries. “The IMF cannot substitute for a robust euro area firewall,” the US Treasury said in a statement. “We have told our international partners that we have no intention to seek additional resources for the IMF.” Read more
The managing director of the IMF has warned that the global economy faces the prospect of “economic retraction, rising protectionism, isolation and . . . what happened in the 30s [Depression]”, the FT reports, as European tensions again flared over suggestions in Paris that the UK’s credit rating should be downgraded before France’s. “There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating,” Christine Lagarde said in a speech at the US state department in Washington. “It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action.” Bloomberg reports Ms Lagarde said international support would probably be channeled through the IMF for “organizing a collective financial responsibility, a fiscal solidarity and that element of risk-sharing that is expected, pretty much, around the globe.”
It’s been the subject of more rumours than Kim Kardashian but the ECB-IMF switcheroo is increasingly likely, at least according to reports from Bloomberg and Reuters.
One would think the involvement of the credible-again IMF would be good news. But in a note out Monday, Nomura’s Desmond Supple warns of three “significant drawbacks” to using the IMF as a conduit for ECB or National Central Bank (NCB) funds. Read more
Asian markets slid on Wednesday amid fears the Greek bailout deal would collapse. George Papandreou’s government teetered on the verge of collapse on Tuesday, the NYT reports, as opposition to his surprise plan for a referendum on the new bailout threatened Greece’s adherence to the terms of the deal. An emergency cabinet meeting convened by Mr Papandreou ended at nearly 3am on Wednesday, it says, with local news outlets reporting that cabinet said that it unanimously supported the referendum. The opposition and some members of his own party, however, were calling for new elections immediately. The FT reports that eurozone leaders were racing to save the deal agreed last week, with an angry Angela Merkel and Nicolas Sarkozy summoning Mr Papandreou to emergency talks in Cannes on Wednesday with Christine Lagarde, managing director of the IMF, and the heads of the leading European institutions, to buttress the eurozone’s position on the eve of the G20 summit. Mr Papandreou’s move may be unpopular with voters, too, as Reuters says some Greeks view the referendum as a ploy to win backing for harsh austerity measures. Asian equities slumped, with Sydney and Tokyo reaching one-week lows, on concerns about the referendum, says the WSJ. Read more
France’s president Nicolas Sarkozy flew to Frankfurt on Wednesday night for an emergency meeting on the eurozone crisis at Jean-Claude Trichet’s farewell party, while his wife Carla Bruni was giving birth to their first child. Bloomberg reports that with just four days before the summits that are supposed to announce a solution, there was Franco-German tensions appear to be persisting. The FT reports other attendees at the meeting, held in the wings of the festivities at the Alte Oper in Frankfurt, were German chancellor Angela Merkel, along with Mario Draghi, Mr Trichet’s successor, and Christine Lagarde, head of the IMF. Herman Van Rompuy, president of the EC, and José Manuel Barroso, president of the EC, were also involved, as were François Baroin and Wolfgang Schäuble, the French and German finance ministers. The meeting broke up after two hours with neither the German or French leaders making any comment. German officials on Wednesday reaffirmed the country’s opposition to the ECB providing the European rescue fund with a line of credit. Ms Merkel, who has little room to manoeuvre on the EFSF in Berlin, will address Bundestag with Mr Schauble on Friday morning. Earlier, the FT reported that EU bank recapitalisation plans may fall well short of expectations, with a level of €80bn being discussed. The finance ministry denied a report in FT Deutschland that Mr Schauble had talked of the EFSF firepower being increased to €1,000bn, says Bloomberg. Read more
A French court has ordered a judicial investigation into the role played by Christine Lagarde, the newly appointed head of the International Monetary Fund, in a €285m arbitration payment to a controversial businessman. The FT reports Ms Lagarde was France’s finance minister when Bernard Tapie won a settlement in 2008 with Credit Lyonnais, a previously state-owned French bank, over the mishandled sale of Adidas, the sportswear company, in the 1990s. A panel at the Court of Justice of the Republic – which exists to investigate, prosecute and try cases of alleged ministerial wrongdoing – decided on Thursday that an investigation should be launched into her role. Ms Lagarde, who took over at the IMF in June, has always denied any wrongdoing. Her French lawyer, Yves Repiquet, said on Thursday that she welcomed the investigation. “We’ll get to the bottom of things,” he said. “There will no longer be the least doubt.” Legal and political experts cautioned that the controversies surrounding Dominique Strauss-Kahn and Lagarde are hardly the same in their levels of severity, the Washington Post says. Read more
European authorities should stop public bickering and speak with one voice to make the second rescue package for Greece work, warned Christine Lagarde, the new managing director of the International Monetary Fund. In an interview with the FT, the former French finance ministersaid public discord between eurozone ministers and the European Central Bank over the last bail-out had created confusion in the markets. “Putting on my European hat for a microsecond…we did not communicate it in a harmonised fashion, nor did we particularly speak with one voice,” she said, adding that this time the Europeans must “stick to the script”. But Ms Lagarde, the 11th successive European to run the IMF, also defended the eurozone’s handling of the Greek crisis and fiercely resisted criticism that she was likely to be biased towards Europe.
Representatives of leading emerging market countries at the International Monetary Fund have warned the fund’s management against pouring more large sums of money into another Greek bail-out with uncertain prospects, the FT says. The officials said that – several days after a new financing plan from the eurozone authorities – its details were unclear and a proposed reduction in private sector holdings of Greek debt appeared to be inadequate. Interviews with the FT, including the Brazilian and Indian representatives, along with private conversations with other representatives from non-European economies, reveal several governments unwilling to risk financial contagion by curtailing IMF lending to Greece, but alarmed at the risks the fund was taking. Concerns among countries on the fund’s executive board pose a challenge to IMF managing director Christine Lagarde, who soon must decide how much more money she recommends is lent to Athens. Read more
Christine Lagarde, the new head of the International Monetary Fund, said on Tuesday that the US debt ceiling must be raised immediately and admitted some investors had doubts about the financial rescue for Greece announced last week, the FT reports. In her first major public appearance as managing director of the fund after taking over on July 5, Ms Lagarde told the Council on Foreign Relations in New York that the US authorities should follow the lead shown by the eurozone in ramping up their support for Athens. She also raised the possibility that the IMF will need more funds to tackle ongoing economic crises, the WSJ says. Read more
The White House and congressional leaders expressed confidence they could still reach a deal to raise the US borrowing limit and avert a default, the FT says, even after talks to strike an ambitious plan to cut $4,000bn from the country’s deficit broke down over disagreements on tax cuts for the wealthy. Talks on Monday will instead focus on a more limited $2,000bn savings plan after John Boehner, Republican Speaker of the House of Representatives, on Saturday rejected a large-scale deficit reduction compromise because of Democratic insistence on raising new revenues in the deal. New pressure to strike a deal could come this week from Wall Street. Moody’s Investors Service has warned it could place America’s triple-A credit rating on review for downgrade by mid-July in the absence of a deal. Treasury secretary Tim Geithner and new IMF chief Christine LaGarde both warned on Sunday of the ramifications of a US default, reports Reuters. Read more
Christine Lagarde, France’s finance minister, will next week take over as head of the International Monetary Fund and will immediately face tough decisions on the troubled Greek financial bail-out, notes the FT. Reuters blogger Felix Salmon reckons Lagarde’s appointment was announced two days early in an effort to cool the Greek situation. Pimco CEO and former IMF hand, Mohamed El-Erian, says Lagarde must strengthen the “analytical robustness” of the funds’s response to debt crises, and also prepare the IMF’s balance sheet for the risk of future impairment resulting from loans made in the past year. Read more
US Treasuries are in sell-off mode as a firmer euro and confidence in Greece eliminate some of the demand for “safe haven” assets, the FT reports. At the same time, risk assets have stabilised and then rallied as some in the market hope a damaging eurozone sovereign debt contagion crisis can be averted. Bloomberg reports that Asian equities and the South Korean won have both climbed for a second day on hopes of a resolution. A French-led plan to rollover Greek debt, now joined by German banks as well, is seen by optimists as reducing the chances of a default by Athens, and investors now appear to be betting that the Greek parliament will pass the latest austerity package in votes this week. The euro has sprung higher, and because its moves have of late been used as a broad risk appetite barometer by the more slavish among the trading fraternity, it has triggered a headlong rush back into racier plays. Meanwhile Christine Lagarde, confirmed as the new IMF chief, will immediately face tough decisions over the Greek bail-out, says the FT. Read more
Christine Lagarde, France’s finance minister, will next week take over as head of the International Monetary Fund and will immediately face tough decisions on the troubled Greek financial bail-out, reports the FT. Soon after her appointment was confirmed, Ms Lagarde called on the Greek opposition to support the government’s austerity measures. “They need to put aside political differences and work in the service of their country,” she told TF1, the French television station. Ms Lagarde, who had been clear favourite for the job, maintained Europe’s dominance at the top of the international financial institution. As is traditional, she was appointed by consensus by the fund’s 24-member board. The only other candidate, Agustín Carstens, the Mexican central bank governor, had already conceded that his candidacy was a long shot, but he was praised by the board and by Tim Geithner, US Treasury secretary, for his qualifications and abilities. Read more
French Finance Minister Christine Lagarde appeared poised to become the head of the International Monetary Fund this week, Reuters says. The news agency carried out an informal survey of voting countries which indicated Ms Lagarde would easily get the majority consensus needed over Mexico’s central bank governor Agustin Carstens to lead the global lender. Carstens picked up endorsements from Canada and Australia late on Friday in a significant challenge to Europe’s grip on the IMF top post, but it is unlikely to change the outcome.
The board of the IMF has blocked the application of Stanley Fischer, governor of the Bank of Israel, to head the organisation, leaving only two candidates in contention, the FT reports. The candidacy of Fischer, 67, who announced his decision to run for the position of managing director on Saturday, would have required IMF members to waive a requirement that applicants be younger than 65. MarketWatch adds that the IMF will now consider Christine Lagarde and Agustin Carstens for the top job. Read more
Stanley Fischer, governor of the Bank of Israel, has had his application to head the IMF blocked, the FT says, leaving only two candidates in contention. The candidacy of Mr Fischer, 67, who announced his decision to run for the position of managing director on Saturday, would have required IMF members to waive a requirement that applicants be younger than 65. The board decided not to accept that request, with some of the rich economies arguing that his candidature would confuse and delay the process. The decision leaves Christine Lagarde, the French finance minister, and Agustin Carstens, Mexico’s central bank governor, as the lead candidates. Read more
Stanley Fischer, the Israeli central bank governor, made a surprise entry to the race to become the next managing director of the International Monetary Fund, as the two existing candidates fight to boost their credibility with emerging market countries, the FT says. Fischer, previously a second-in-command at the IMF, made public his decision on Saturday shortly after nominations closed, to the surprise of several emerging markets. The Jerusalem Post says Fischer’s candidacy is currently seen as a long-shot behind French Finance Minister Christine Lagarde. Meanwhile, Fischer noted in an interview with the WSJ that “without having that [economic] training, it’s very hard to know who’s right and who’s wrong” at the IMF. Read more
Christine Lagarde, the French finance minister, began a tour on Monday to lobby support among the big emerging economies for her bid to become managing director of the IMF, the FT reports. She vowed in Brasília to “universalise” the organisation. Lagarde is regarded as the frontrunner for the post but Brazilian support would be an important stepping stone to rallying other developing countries around her candidacy. Seperately, the FT says that developing countries — “less practised at the art of the IMF stitch-up” have failed to reach consenus on a new IMF head. The Wall Street Journal adds that after her stop in Brazil, Lagarde is scheduled to visit countries including China, India, and Saudi Arabia.
A French businessman and anti-corruption campaigner has asked prosecutors to investigate the role of French finance minister Christine Lagarde, the front runner to become the next IMF head, in a recent corporate deal, reports Reuters. Jean-Marie Kuhn accuses Lagarde of abusing her authority by allowing state bank Caisse des Depots to buy a 25% stake in GRTgaz, the gas grid of utility GDF Suez, earlier this year, according to a letter he sent to a state prosecutor. “We consider this pure fantasy,” a finance ministry official said in reaction to Kuhn’s allegation. Lagarde, who won respect for her role in handling the eurozone debt crisis, already faces an inquiry into her 2008 decision to settle a dispute between the state and businessman Bernard Tapie, a friend of President Nicolas Sarkozy. Lagarde has denied any misconduct in the Tapie affair. The former top lawyer is the leading candidate to replace Dominique Strauss-Kahn as managing director of the IMF. Read more
Christine Lagarde, the French finance minister, has launched her bid to become the next managing director of the International Monetary Fund, writes the FT. Ms Lagarde, who has widespread support in Europe amid praise for her handling of the eurozone crisis, said she considered her nationality neither “a handicap, nor an advantage” for the top job in global finance. The former US-based corporate lawyer, 55, is the frontrunner to succeed Dominique Strauss-Kahn, who resigned last week after being charged with sexual assault. But the growing consensus in the industrialised world over Ms Lagarde’s nomination has sparked disagreement with emerging market countries, which argue that the leadership of the fund should no longer be reserved for a European. Her main rival is Agustín Carstens, governor of the Mexican central bank, who told the Financial Times that he intended to carry “the flag of emerging markets”. Read more
Breaking pre-market news on Monday,
- Asian stocks drop to two-month low after Greece downgrade – Bloomberg. Read more
Christine Lagarde, France’s finance minister, has emerged as the top contender to run the IMF after being strongly endorsed by her German and British counterparts, who want to maintain Europe’s 65-year grip on the global institution, reports the FT. Both George Osborne, UK chancellor, and Wolfgang Schäuble, Germany’s finance minister, said at the weekend Lagarde was the best candidate for the post. However, Schäuble told the Bild am Sonntag newspaper, it was “crucial for “Europe to speak with one voice on this question.” The finance ministers of South Africa and Australia on Sunday signalled that Lagarde does not enjoy the same support outside Europe, calling for candidates to be selected on ability rather than nationality. Dominique Strauss-Kahn, a former French finance minister, resigned as IMF managing director last week after his arrest on sexual assault charges in New York. Read more
European policymakers are scrambling to stake the continent’s claim to provide the next leader of the International Monetary Fund, after the resignation of Dominique Strauss-Kahn as managing director, the FT reports. Mr Strauss-Kahn’s departure, announced late on Wednesday, followed increasing pressure from the US and other governments for him to step down after he was charged with sexual assault on a hotel maid in New York last weekend. On Thursday, Mr Strauss-Kahn was indicted on charges including attempted rape. He was granted bail of $1m in cash and a $5m bail bond and was expected to be released from custody on Friday. He denies the charges. Until his trial, he will be kept, at his own expense, under a 24-hour armed guard at a New York home rented by his wife. The IMF’s executive board, on which European countries hold just over 30 per cent of the votes, will probably appoint the next managing director within the next month or two, with candidates nominated by member countries. France’s finance minister Christine Lagarde is seen as a frontrunner. Read more
DSK is gone, the press is already glowing, and if you thought Christine Lagarde was a steal for next IMF MD at 14/1 on Wednesday…
Odds from William Hill, chart from the Economist:
Dominique Strauss-Kahn, the head of the International Monetary Fund, was denied bail on Monday after being formally charged in New York court over an alleged sexual assault on a maid at a hotel in the city, the FT reports. The prominent French politician, who has considering running in next year’s presidential race in his home country, arrived at the Rikers Island prison complex Monday evening and is to remain there until a hearing on Friday. A judge at the Manhattan criminal court decided against releasing him on bail. Mr Strauss-Kahn’s wife had wired $1m to New York for that purpose. The Guardian now speculates that either France’s Christine Lagarde, Turkey’s Kemal Dervis or former UK prime minister Gordon Brown may be possible candidates to succeed Strauss-Kahn as the head of the International Monetary Fund. Read more
No, you could not make it up, as FT Alphaville previously noted.
News of the weekend arrest of IMF managing director Dominique Strauss-Kahn gave blogs and news media organisations an eventful Sunday night as more information emerged about the circumstances allegedly leading to Strauss-Kahn’s arrest. Read more