Juncker: IMF could turn off aid to Athens
PANICKING investors dropped the euro yesterday after comments by Eurogroup chairman Jean-Claude Juncker sparked a bout of anxiety over the fate of the single currency.
Juncker raised the alarm by warning that the IMF might not be able to pay out its next instalment of aid to Greece if the sovereign does not have funding in place for the next year.
“The IMF can only be active when there is a refinancing guarantee for 12 months,” he said, adding that such a guarantee is unlikely: “I don’t think that the troika (the EU, IMF and ECB) will come to this result.”
He further stoked fears by saying that should the IMF refuse to contribute its third to Greece’s rescue funds, it would be politically difficult for the EU to plug the gap. “The expectation of the IMF is that the Europeans would step in for the IMF and take upon themselves the IMF’s portion of the financing… That won’t work, because in certain parliaments – Germany, Finland and the Netherlands and others too – there is no preparedness to do so.”
In response, the euro dropped 12 cents against the dollar, 8p against sterling and five cents against the Swiss franc.
Analysts speculated that Juncker could be attempting to scare Greece into taking its deficit seriously by indirectly raising the prospect of a default. The IMF is due to dispense its share of another €12bn (£10.4bn) in aid to Greece on 29 June as part of its €110bn bailout package.
But the funds are subject to strict conditions, with the IMF, ECB and EU currently in Athens to examine its fiscal situation. The EU admitted recently that a “soft restructuring” of Athens’ debt is likely, which ratings agencies have said would effectively constitute a default.