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Europe must “deliver on the commitments they’ve made”, Timothy Geithner said yesterday. “They’re saying a lot of the right things and they’re clearly working on it and they’re moving with a greater sense of urgency. That’s all welcome, but until we see what they come together with, it’s a little hard to evaluate.” Greece, recipient of €110 billion as the first crisis victim last year, is counting on bond investors to accept “voluntary” losses as high as 60 per cent, and on euro governments and the International Monetary Fund to lend at least €109 billion more to enable it to pay its bills.
Talks on boosting the EFSF’s €440 billion war chest have centreed on two models - using it to insure bond sales and to fund a special investment vehicle that would court outside money, including from the IMF. Debate is continuing over how to pair a planned €500 billion permanent fund with the current pool, which is scheduled to be wound down even though its loans for Greece’s second bailout package will run for up to 30 years.
Leaders will consider amending or scrapping a clause in the statutes of the permanent fund, the European Stability Mechanism, that caps lending during the transition phase between the two funds at €500 billion. One proposal is to leave the EFSF’s commitments - €150 billion and counting - untouched by the cap.