IMF denies bailout looms for Italy
Lagarde tells developed countries to learn from Latin America as Italians forced to pay 7.3pc to borrow over 10 years
Published 29/11/2011 | 05:00
The IMF was yesterday forced to deny it is preparing a bailout out for Italy, the eurozone's third largest economy, after the debt-ravaged country was forced to pay investors 7.3pc to borrow money for over 10 years.
Despite electing a new technocratic government a fortnight ago, the country's borrowing costs continue to surge and it faces yet another bond auction today. Italy's Treasury raised €567m of money that is due to be repaid on September 2023.
Italy and Spain have not asked to be rescued by the IMF, the head of the lender said yesterday, as she urged European leaders to quickly solve the region's festering debt crisis.
Managing director Christine Lagarde said the IMF could extend financial lifelines only when governments asked for them and so far help had only been extended to Portugal, Ireland and Greece.
"The IMF has not received any request for assistance from, nor are we negotiating with, either Italy or Spain," she said after meeting with Peruvian President Ollanta Humala.
"We have offered our assistance for fiscal monitoring in Italy," she added.
Ms Lagarde is visiting fast-growing Peru and Latin American heavyweights Brazil and Mexico this week to drum up support for more global co-operation.
Analysts say the IMF may be looking to emerging markets to help increase the size of its credit lines as European woes mount. Brazil has long argued that global institutions should be overhauled to reflect the growing importance of developing countries.
Bond markets have been increasingly volatile on concerns that German opposition to an expanded role for the ECB could leave countries without an important financial backstop if one were needed.
Italian yields are now in the territory that forced Greece, Ireland and Portugal to seek bailouts and an auction today of up to €8bn of BTP bonds will be a crucial test. "As far as the European situation is concerned, clearly we see the need for a comprehensive, rapid set of proposals that can form a comprehensive solution, and the IMF can be part of that," Ms Lagarde said.
EU officials have indicated some sort of IMF programme could make sense for both Italy and Spain as part of a multi-pronged response, involving the ECB and the eurozone rescue fund.
Italian Prime Minister Mario Monti is expected to unveil tax measures on December 5 to win back investor confidence, but market pressure could force him to act more quickly.
In Spain, the centre-right People's Party, which is due to form a new government by mid-December, is considering applying for international aid as one option to shore up its finances, sources close to the party told Reuters.
Ms Lagarde said developed countries could learn a lesson from many Latin American countries, which once suffered economic chaos but now enjoyed stability thanks to prudent policies. (Reuters)