BRUSSELS — The International Monetary Fund, a key player in eurozone bailouts, on Wednesday pushed for radical changes in the way the region's debt crisis should be handled.
Antonio Borges, the head of the IMF's Europe program, said the eurozone's bailout fund should get more firepower and new tools.
To help, he said the IMF could intervene in bond markets to keep the crisis from engulfing large economies like Italy and Spain. The surprise proposal would profoundly alter the fund's role in the crisis.
The IMF has so far contributed close to €80 billion ($105 billion) to eurozone bailouts, about a third of the total.
Borges's statements at a news conference in Brussels are the first open acknowledgment of a radical change in approach by the IMF to the eurozone's debt crisis. They come amid a severe intensification of the currency union's debt troubles as most investors expect a default by Greece and fear much larger Italy and Spain will be dragged into the crisis.
In public statements until now, IMF officials had insisted on agreements made at a eurozone summit in July, which gave a first range of new powers to the region's bailout fund and tentatively offered a second, €109 billion bailout for Greece, with modest losses accepted by banks on their Greek investments.
But Borges made clear on Wednesday that those decisions were no longer sufficient.
He said that the €109 billion figure was an estimate based on conditions that have since changed, adding that a new program needed bigger focus on Greece's massive debt and growth. He said that didn't necessarily entail bigger losses for banks and other private Greek bond holders.1 comment on this story
Borges also piled pressure on Greece to take more stringent measures to get its economy back on track, saying there was no rush to take a decision on the payment on the next slice of bailout money because the country doesn't face a big bond repayment deadline until December.
Athens has said it will start running out of money to pay salaries and pensions in mid-November if it doesn't get the €8 billion ($11 billion) installment of its first €110 billion ($145 billion) bailout.
The increasing uncertainty over Greece's fate have increased market volatility and destabilizing the banking sector. Belgium and France are fighting for the survival of Dexia, the first potential failure of a big European bank since the credit crunch of 2008.