IMF and Greece may negotiate €20bn aid program
Published 25/03/2010 | 11:12
The International Monetary Fund may ultimately hand Greece an aid program worth about €20bn over 18 months, according to Goldman Sachs.
The cash-strapped nation may ask the lender for support within weeks and “very likely” in a few months as it struggles to cut the biggest budget deficit in the European Union, Goldman Sachs’s Chief European Economist Erik Nielsen said in an emailed note to clients today.
European leaders start talks in Brussels today.
“This would be the last opportunity for the leaders to discuss the matter before Greece might be running out of cash,” London-based Nielsen said. “Negotiations, when they get under way, will focus on a program of about €20bn over 18 months.”
German Chancellor Angela Merkel is pushing for the IMF to play a role in any rescue of Greece, a stance that initially put her at odds with French President Nicolas Sarkozy, who preferred using European channels.
Greece must finance €20bn of securities maturing in April and May and Prime Minister George Papandreou said March 19 he may turn to the IMF in the absence of European aid.
Nielsen predicted a formal announcement by the EU that if a euro-zone member “needs financial help then the IMF will be asked to take the lead, both in terms of financing and with respect to policy conditionality.”
“Other EU countries might provide some co-financing like they have done to EU countries outside the euro-zone, but this would be secondary,” he said.