What they recommend is shocking to some, and ringing alarm bells around the finance world.
Sovereign nations are facing shortages of tax revenues, and public finance is in shambles. Multi-national corporations have offshored their assets to avoid paying taxes. The IMF report addresses ideas of how to tax the dodgers that are hurting public finance.
President Barack Obama has ordered the National Security Agency to stop eavesdropping on the headquarters of the International Monetary Fund and World Bank as part of a review of intelligence gathering activities, according to a U.S. official familiar with the matter.
The order is the latest move by the White House to demonstrate that it is willing to curb at least some surveillance in the wake of leaks by former NSA contractor Edward Snowden of programs that collect huge quantities of data on U.S. allies and adversaries, and American citizens.
The NSA’s surveillance of the Washington-based IMF and World Bank has not previously been disclosed. Details of such spy programs are usually highly classified.
As the International Monetary Fund shares initial proposals for Grenada’s debt restructuring during the Washington DC meetings this week, the Caribbean island could gain a reputation for more than nutmeg, calypso, beaches and the 2012 gold medal sprinter Kirani James.
Because Grenada is listening to the nation’s religious leaders, it may become famous for a debt resolution deal that includes the participation of its citizens, protects the most vulnerable from austerity programmes and keeps current employment on the island intact.
Part of what could make possible protecting jobs and the island’s social safety net is curbing corporate and professional tax avoidance in Grenada.
The most interesting part of what propelled this debt deal is that the churches of this tiny island have staked a place at the negotiating table. On this island nation of 100,000 people, where most people on the street are debating any debt deal, religious institutions have taught or served a significant portion of the island’s government leaders.
As in so many parts of the world, often religious groups are the primary social service providers and in the case of Grenada they’ve earned the people’s respect.
The global economy is experiencing “transitions on an epic scale”, the International Monetary Fund managing director said on Thursday, warning that turbulence in emerging markets could knock 0.5 to 1 percentage point off their growth.
Christine Lagarde’s remarks show the damage done to emerging markets by a recent round of “taper talk”, over the possibility of the US Federal Reserve slowing the pace of its asset purchases and their vulnerability to future changes in the pattern of global capital flows.
“The immediate priority is to ride out the turbulence as smoothly as possible,” said Ms Lagarde. “Currencies should be allowed to depreciate. Liquidity provision can help deal with dysfunctional market behaviour. Looser monetary policy can also help.”
The International Monetary Fund warned Tuesday that South Africa is trailing other emerging markets and must quickly implement reforms if it wants to avoid crisis.
The IMF, in an annual report on Africa’s largest economy, pointed to painfully high unemployment and a plethora of other economic troubles staking the country.
[...] Unemployment is officially at 25 percent, but is closer to 35 percent including those who have given up looking for work. Around 50 percent of all young people are without a job.
While South Africa has made “important strides” to correct disparities caused by decades of apartheid rule, the Washington-based institution said systemic problems have “come to the fore” in recent years.
Hungarian Prime Minister Viktor Orban launched another broadside against foreign investors and media on September 9, warning that the era of “colonisation” is over. The heightened rhetoric ahead of the elections next year will only raise worries amongst investors.
Orban and his ruling Fidesz party have been campaigning for some weeks now as they push to try to recapture the constitutional majority currently enjoyed at elections to be held in the spring at the latest. Opening the autumn session of parliament, the PM both boasted of his government’s economic prowess, reiterated promises to cut energy bills, and continued the pressure on the banks to take more losses from their foreign-currency loans.
“Hungary is an independent, sovereign country,” Orban proclaimed as he set out the agenda for the parliamentary session. “The era of colonisation is over. Utility price cuts, the elimination of the foreign currency loan regime and rescuing families and their homes are national causes for us.”
The resumed attack on the banks is the most immediate issue affecting investor confidence. As bne has reported, Fidesz effectively launched its election campaign in a sudden move in July, as it reopened an issue it had previously said was not in its plans. However, forcing the banks to shoulder more big losses from the hundreds of thousands of mortgage loans made in Swiss franc and euro should offer a clear populist boost at the polls.
Previously full of rhetoric concerning “negotiations” with the banks, the government upped the ante in early September. Following up ultimatums issued by officials, Orban told the lower house: “The banks abused their own position and [exploited] the people’s naivete. They were propagating [forex-based] loans while they were aware of the potential risks. They knew exactly what would happen if exchange rates went haywire, they [played down] the risks to customers in advance, [and] they made a deal that meant a huge profit only for them.”
Repeating a chilling new demand that the banks should be ready to absorb the bulk of the losses in phasing out such forex loans, the PM added: “It is a moral obligation of the banks to modify the [loan/mortgage] contracts. We are calling on the banks to bear most of the losses stemming from the exchange rate changes themselves. If they do not comply voluntarily by November 1, the government will take steps [to do so].”
As we repeatedly focus on wealth inequality in the United States (i.e.; just four hundred persons in the US have as much in assets and income as the bottom 50% of Americans), a video points out the even more extreme global wealth disparity.
There are many reasons for this. Take for example institutional sources that contribute to this trend. The World Bank, for interest, oversees “loans” to developing nations. But by creating long-term indebtedness, these struggling counties end up owing at least $600 billion dollars in interest on loans whose principals have, in essence, already been paid off in actual dollars.
These usorious interest rates end up in the hands of the bankers and the shareholders of the financial institutions that are inter-related with the World Bank through the nations that govern it, particularly the United States which calls the shots. Criticisms of the World Bank focus on how it creates financial conditions that result in debt dependency of the nations that borrow from it, therfore negatively impacting the economic prospects of the vast majority of its residents.
Trade agreements and global corporate exploitation of international monetary regulations provide resources and cheap labor to developed nations, while leaving poorer countries depleted. Is it possible that rich countries have increased the wealth gap from being 35 times greater during European colonialization to 80 times greater today? The video Global Wealth Equality contends that is the case.
EU Justice Commissioner Viviane Reding called on Tuesday for the “troika” of the European Commission, the European Central Bank and the International Monetary Fund (IMF) to be dissolved.
“The time of the troika is over,” Reding said in a text of the main messages she gave at a citizens’ dialogue in Heidelberg in south-western Germany.
“Getting the IMF on board in recent years was an emergency solution. In future, we Europeans have to be able to resolve our problems on our own,” Reding, who is also vice-president of the European Commission, added.
The troika negotiates with countries in crisis, such as Greece, Portugal and Ireland, on austerity and reform measures they have to undertake in return for bailouts. It also supervises the implementation of such steps.
Reding said European institutions could manage this without the IMF.
- Egypt military’s economic empire (Al Jazeera)
- Morsi’s plan to keep the Egyptian army sweet (Chatham House)
- The Army and the Economy in Egypt (Jadaliyya)
- The Economic Vision of Egypt’s Muslim Brotherhood Millionaires (Business Week)
- Egypt’s army in control of vast business empire (BBC)
- US billions prop up military that toppled Egypt’s elected president (NBC)
- New Egypt PM Hazem El Beblawi has strong economic history (Reuters)
- Liberal economist Hazem El-Beblawi appointed new Egyptian PM (Ahram)
- Profile: Interim Egypt Prime Minister Hazem el-Beblawi (BBC)
- Egypt’s interim PM: liberal economist Hazem al-Beblawi (France 24)
- Egypt Premier Known as Free-Market Champion (Wall Street Journal)
Eurozone finance ministers agreed Monday [July 8th] to unlock billions of euros in fresh aid for Greece on condition it press ahead with urgently needed reforms.
The Eurogroup ministers, holding their last meeting before the summer break which was also attended by IMF chief Christine Lagarde, agreed to pay out 6.8 billion euros in fresh aid to Athens.
However, the funds would not be handed over in one lump sum, but in different instalments subject to certain conditions being met.
The International Monetary Fund in Washington on Tuesday said economic growth prospects for 2013 had weakened since April.
In the group’s World Economic Outlook report, the IMF said global economic growth in 2013 would be slightly above 3 percent, dropping its growth predictions due to “weaker domestic demand and slower growth in several key emerging market economies.”
The IMF said risks to growth had increased since April, when it published its last World Economic Outlook report.
by Prof Michel Chossudovsky
“[US Defense Secretary] Hagel and [US Chief of Staff General] Dempsey were walking a fine line … expressing concern whileattempting to avoid the impression that the U.S. was manipulating events behind the scenes.” (Military.com, July 3, 2013)
The protest movement is directed against the US and its proxy Muslim Brotherhood regime.
The Muslim Brotherhood had been spearheaded into the government with the support of Washington as a “replacement” rather than an “alternative” to Hosni Mubarak, who had faithfully obeyed the orders of the Washington Consensus from the outset of his presidency.
While the Armed Forces have cracked down on the Muslim Brotherhood, the Coup d’Etat is ultimately intended to manipulate the protest movement and prevent the accession of a “real people’s government”. The overthrow of President Mohamed Morsi by the Egyptian Armed forces was not carried out against US interests, it was instigated to ensure “continuity” on behalf of Washington.
“Demonstrators carried hand-made posters denouncing Obama and his pro-Muslim Brotherhood Cairo Ambassador, Anne Patterson.” (F. William Engdahl, Global Research, July 4, 2013).
by Nafeez Ahmed
Last night’s ousting of President Mohamed Morsi by the Egyptian army comes as no surprise. Despite being Egypt‘s first freely elected leader, his attempts to override democratic checks and balances while grabbing unilateral executive power fuelled widespread simmering grievances. Although Adli Mansour, the new interim leader sworn in today by the army, promises to pave the way for new democratic elections, the fundamental drivers of Egyptian rage remain overlooked.
Morsi’s key problem was that he had spent most of his energies on consolidating the reach of his party, the Muslim Brotherhood, rather than dealing with Egypt’s entrenched social, economic and political problems. Indeed, Egyptian unrest is the consequence of a fatal cocktail of structural failures rooted in an unsustainable global model of industrial civilisation – addicted to fossil fuels, wedded fanatically to casino capitalism, and convinced, ostrich-like, that somehow technology alone will save us.
Egypt should refuse a $4.8 billion loan from the International Monetary Fund rather than submit to terms that would further impoverish the poor and could spark a revolution of the hungry, leftist leader Hamdeen Sabahi said on Monday.
Sabahi, 58, who came third in a presidential election last year after the 2011 uprising that toppled autocratic President Hosni Mubarak, told Reuters that neither the global lender nor Egypt’s Islamist-led government had told the public the truth about austerity conditions attached to the proposed loan.
The firebrand leader of the Popular Current movement met an IMF team that visited Cairo this month for talks which ended without an agreement partly due to a lack of political consensus to support the accompanying economic reform program.
Asked whether he would agree to the IMF’s conditions, Sabahi said: “No. I would not agree to them.”
by Tyler Durden
From time to time it is necessary to quietly sit down and assess where we are going. This is a significantly different undertaking than listening to those who try to tell us where we are going. Government and the Pastors of Propaganda are always whispering into our ears either offering Heaven or the retribution of Divine Providence so the removal of either from a deliberate consideration is a necessary part of the examination of reality.
I bring a measure of experience to this task. Things that are not counted, liabilities that are excluded from national budgets or their debts, do not mean that they do not have to be paid. This, in fact, is Europe’s greatest problem. They have played “extend and pretend.” They have played “lie and deny.” They have resorted to every trick imaginable when compiling data such as the debt to GDP ratios of the countries and yet; chicanery does not erase the debts.
The financial projections of the IMF, the EU and the ECB are never accurate or even close to accurate because they use garbage for their data. It is therefore “garbage in” and “garbage out” as they all make a mockery of themselves. The vast amount of investors continue to believe them as evidenced by the markets but certain events are now about to take place.
Greece reported out a -14.2% decline in just one month this morning for retail sales. Greek collapse III is almost at hand as their two major privatizations have failed and as their economy continues to worsen. Soon the Greeks will call for more money but the end of this road is in sight as I do not believe the nations in Europe are willing to roll over again. The IMF is also up against the wall and they have asked, I understand, for Europe to forgive part of the Greek debt which has fallen, so far, on deaf ears.
The Cyprus solution is a failure. It is as clear and as simple as that. Cyprus will have $10.17 left in their banks by the end of the year. They will soon be back asking for more money and we will have another IMF problem and a Euro fiasco as the amount of money they have been given to date is akin to a flyswatter trying to smack down an F-14. A ridiculous incident in both cases.
The biggest problem though is going to be France. They have a stated debt to GDP ratio of 90.2%. This is another mockery of the data though as the real number, liabilities included, is somewhere around double this number or just below 200%. They also have an economy that, according to “Trading Economics,” is expected to decline in the next quarter by -0.5% while their sovereign debt increases to $366.9 billion which is an increase of 9.5%. This is while their government spending rises 9.9% for the same time period. This, then not only puts them in violation of the EU’s current mandates, which is a secondary consideration, but puts them clearly on the road to insolvency.
France has run out of road.
The real issue here is a question of politics. In France being rich is defiled. That is fine and dandy except this attitude leads to an inescapable end which is with a 75% tax rate, massive amounts of workers in the government, social programs that keep increasing, and no reason to be successful and thereby support the government; those with money are fleeing the country. The drain is enormous.
Consequently sovereign revenues cannot, by any stretch of the imagination, support the imbedded costs of the country which must either be drastically cut, think massive protests or where France shows up at the door of the EU asking for help, which would be a disaster for the European Union. I believe the country is at this crossroads now as their fiscal policy, regardless of politics, is just not sustainable.
Now the investors of the world are in another reality altogether. They do not want to hear anything about these sorts of things. They are in the state of, “ignore and deplore.”
You can live there for a while. Government induced fantasies have occupied the center stage before and for some time. Our current denial of reality is fueled by all of the money that the central banks have pumped into the world but that will be diminishing as the Fed and others examine the longer term consequences of their actions. There are always consequences.
What has been put off will arrive. It was always just a matter of time.
Time is running short.
by Prof Michel Chossudovsky
More than a million people across Brazil have joined one of the largest protest movements in the country’s history. Ironically, the social uprising is directed against the economic policies of a self-proclaimed “socialist” alternative to neoliberalism led by the Worker’s Party government of president Dilma Rousseff.
The IMF’s “strong economic medicine” including austerity measures, the privatization of social programs have been implemented under the “progressive” and “populist” banner of the Partido dos Trabalhadores (PT), in consultation with Brazil’s powerful economic elites and in close liaison with the World Bank, the IMF and Wall Street.
While the PT government presents itself as “an alternative” to neoliberalism, committed to poverty alleviation and the redistribution of wealth, its monetary and fiscal policy is in the hands of its Wall Street creditors.
Ironically, the PT government of Dilma Rousseff and her predecessor Luis Ignacio da Silva has been commended by the IMF for:
“a remarkable social transformation in Brazil underpinned by macroeconomic stability and rising living standards”.
The underlying social realities are otherwise. The World Bank’s “statistics” on poverty are grossly manipulated. Only 11 percent of the population, according to the World Bank are beneath the poverty line. 2.2 percent of the population are living in extreme poverty.
The standard of living in Brazil has collapsed since the accession of the Workers Party in 2003. Millions of people have been marginalized and impoverished including a significant part of the urban middle class.
While the Partido dos Trabalhadores (PT) presents a “progressive” people’s oriented image, officially opposed to “corporate globalization”, the macro-economic agenda has been reinforced. The PT government has consistently manipulated its grassroots, with a view to imposing what the “Washington Consensus” describes as “a strong policy framework”.
The multibillion dollar profit driven infrastructural investments pertaining to The World Cup in 2014 and the Olympic Games in 2016, wrought by corporate corruption, have contributed to a significant increase in Brazil’s external debt, which in turn has reinforced the control of economic policy by its Wall Street creditors.
The protest movement is in large part made up of people who voted for the Partido dos Trabalhadores (PT).
The PT government’s grassroots support has been broken. The base of the Workers Party has gone against the government.
by Tyler Durden
As we warned earlier in the week, Greece is notably missing its Troika goals and the issue just became a lot more critical. As The FT reports, the IMF is preparing to suspend aid payments to Greece over what it claims is a EUR 3-4 billion shortfall that has opened up. Between healthcare budget shortfalls, central banks refusing to roll-over Greek bonds, and amid signs that even the scaled-back privatization plans that Athens had agreed to being behind schedule, the IMF - following its own admissions of mistakes in the Greek bailout, has warned EU officials the shortfall will require it to stop aid payments by the end of July. The equity market is already reacting (as is EURJPY – EUR weakness against the big carry pair) to this re-awakening of EU event risk (and the awkward timing with Merkel’s election so close) – with the Fed’s comfort blanket somewhat removed.
Two of the main institutions in charge of managing Europe’s debt crisis have clashed over whether mistakes were made in the handling of Greece’s debt woes.
The European Commission, executive arm of the 27-country European Union, Thursday firmly rejected a report from the International Monetary Fund on the Greek bailout, adding that it “fundamentally disagrees” with some of its findings.
The EU Commission, the IMF and the European Central Bank form the so-called troika of creditors that manages the bailouts for several countries in the 17-nation eurozone. The IMF said in its report Wednesday there had been “notable failures” in the way Greece’s 240 billion euro ($310 billion) bailout was handled, admitting that it had underestimated how much austerity measures would worsen the country’s economic plight. Greece is now in its sixth consecutive year of recession and unemployment has risen to 27 percent.
FULL ARTICLE @ MAIL.COM
With foreign reserves diminishing fast, Pakistan is on the brink of an economic crisis that may force its new government to ask for an unpopular bailout from the International Monetary Fund requiring a sweeping overhaul of the country’s economy.
The troubles could inject a new element of instability into the nuclear-armed nation of 180 million people that Washington is relying on to combat Islamic militants at home and to help negotiate an end to the war in neighboring Afghanistan.
Pakistan’s foreign currency reserves stood at just $6.4 billion as of May 17, down from more than $14 billion two years ago. That is only enough to cover about 1.5 months’ worth of imports while the IMF considers adequate foreign reserves for any country enough to cover three months of imports.
‘The IMF is reiterating its confidence in Managing Director Christine Lagarde’s leadership after a French court stopped just short of charging her in an investigation of a payoff to a businessman.
Lagarde was questioned at length for two days last week in the French hearings, which concluded by naming her a key witness in the probe of the payoff arranged while she was France’s finance minister. She could still be charged in the case at a later date.’
‘International Monetary Fund chief Christine Lagarde will be grilled Thursday by prosecutors investigating a huge state payout to a disgraced tycoon during her time as French finance minister.
Lagarde will appear before the Court of Justice of the Republic (CJR), which probes cases of ministerial misconduct, to explain her 2007 handling of a row that resulted in 400 million euros being paid to Bernard Tapie.
Tapie is a former politician and controversial business figure who went to prison for match-fixing during his time as president of France’s biggest football club, Olympique Marseille.
Prosecutors working for the CJR suspect he received favourable treatment in return for supporting Nicolas Sarkozy in the 2007 and 2012 presidential elections.
They have suggested Lagarde — who at the time was finance minister — was partly responsible for “numerous anomalies and irregularities” which could lead to charges for complicity in fraud and misappropriation of public funds.
Lagarde would not automatically be forced to resign her job as head of the International Monetary Fund if a French court decides to prosecute her in the Bernard Tapie case.
But such a ruling could weaken her as managing director of the Fund, after having led it through four difficult eurozone rescues in her 22 months in the job.
And it would mean the second IMF managing director in a row – both French – beset by legal problems, after the sex scandal that forced the resignation of her predecessor, Dominique Strauss-Kahn.’
‘The IMF has approved a three-year, $1.3 billion loan to jump start recovery in Cyprus and restore financial credibility to its indebted banking industry.
The funds will be distributed to stabilize the banking industry, tame the debt deficit, and to restore economic growth on the island.
The IMF announced on Wednesday it had approved the first $111 million (86 million euro) installment of the loan, which was made immediately available to the Cypriot government. The next installment of $1.3 (1 billion euro) will be wired before June 30th, 2013 and fostered by the Luxembourg-based European Stability Mechanism.
The bailout is part of a $13 billion (10 billion euro) monetary package funded by Troika lenders over the next three years.The financial assistance is intended to prevent a further crisis and to revive the economic pulse of the debt-stricken nation.’
‘IMF chief Christine Lagarde said Thursday she saw little alternative to the agenda of austerity being pushed across Europe, after massive demonstrations in several countries demanded an end to the policies.
Asked by journalists from Swiss public broadcaster RTS if there existed any alternatives to austerity programmes, Lagarde answered: “What is the alternative?”
Returning to out-of-control deficits was not an option, Lagarde said, adding that stimulus programmes were impossible as these could only be financed by more debt.’
IMF chief Christine Lagarde has been summoned by a French court to answer questions over alleged abuse of office during her time as France’s finance minister, her lawyer has said.
Ms Lagarde is to be questioned before a magistrate in May over her role in the awarding of financial compensation to businessman Bernard Tapie in 2008.
Ms Lagarde, who took over as IMF chief in 2011, denies any wrongdoing.
Her apartment was searched last month as part of the ongoing investigation.
As finance minister, Ms Lagarde referred Mr Tapie’s long-running dispute with bank Credit Lyonnais to an arbitration panel, which awarded him 400m euros (£340m) damages.
Mr Tapie was a supporter of ex-President Nicolas Sarkozy.
Critics say she abused her authority but Ms Lagarde denies any wrongdoing.
by Larry Elliott
George Osborne has been told by the International Monetary Fund to rethink the pace of his deficit reduction plan after the Washington based institution cut its forecast for UK growth in both 2013 and 2014.
The IMF’s flagship publication – the half-yearly World Economic Outlook – provided fresh ammunition for the chancellor’s Labour critics when it said the Treasury should contemplate being flexible about its austerity strategy.
In its latest forecasts, the Fund said gross domestic product in the UK would rise by 0.7% this year and by 1.5% in 2014 – in both cases a cut of 0.3 points from its last set of predictions in January.
Eagerly awaited growth figures for the UK are due out next week but regardless of whether they show Britain in an unprecedented triple-dip recession, the IMF said recovery was progressing slowly, held back by the weakness of trade and attempts to reduce the government’s budget deficit.
Egypt is stalling on the terms of a $4.8 billion International Monetary Fund loan to help it fight a deepening economic crisis, and no deal is likely while an IMF team is in Cairo, diplomats said on Sunday.
The IMF mission is set to leave on Tuesday after nearly two weeks of talks, and negotiations may continue on the sidelines of this week’s IMF ministerial meetings in Washington, they said.
An IMF program could help stabilize Egypt’s economy in the rocky transition to democracy since the 2011 overthrow of former President Hosni Mubarak, unlocking up to $15 billion in aid and investment to improve a dismal business climate.
But diplomats and politicians say Islamist President Mohamed Mursi had yet to endorse required tax increases and subsidy cuts that prompted him to halt implementation of an earlier IMF deal in December, two weeks after it was agreed in principle.
[...] One Western diplomat said that after securing $5 billion in stopgap finance from Qatar and Libya last week, Egypt no longer felt the same sense of urgency to conclude the IMF negotiations.
[...] Egypt’s economy has deteriorated significantly since the November IMF agreement stalled. Tourism and investment have dwindled due to political turmoil in the Arab world’s most populous country, where 40 percent of the 84 million citizens live on less than $2 a day.
[...] Diplomats said the ruling Muslim Brotherhood was reluctant to impose unpopular tax and fuel price increases before parliamentary elections provisionally due to start in October.
Nevertheless the Brotherhood’s Freedom and Justice Party is pushing through parliament new tax laws apparently linked to the IMF deal. Opposition politicians accuse the government of trying to impose its will without dialogue.
Planning Minister Ashraf El Araby warned last week that Egyptians would face worse austerity without an IMF deal. Ministers fear a long, hot summer of power cuts and possible fuel and food shortages that could spark unrest.
by Philip Aldrick
Speaking in New York ahead of next week’s IMF Spring meeting, Ms Lagarde launched a broadside against the financial services industry for resisting urgent reform.
“In too many cases – from the United States in 2008 to Cyprus today – we have seen what happens when a banking sector chooses the quick buck over the lasting benefit, backing a business model that ultimately destabilizes the economy. We simply cannot have pre-crisis banking in a post-crisis world.
“We need reform, even in the face of intense pushback from an industry sometimes reluctant to abandon lucrative lines of business.”
Almost five years since Lehman Brothers collapsed, she claimed: “The ‘oversize banking’ model of too-big-to-fail is more dangerous than ever. We must get to the root of the problem with comprehensive and clear regulation.”
Regulators have forced banks to increase significantly their loss-absorbing capital buffers since the crisis, but are still working on “resolution” mechanisms that will allow giant lenders to fail without hitting the taxpayer and threatening financial stability.
The International Monetary Fund officially recognized the Somali government on Friday, ending a 22-year hiatus and allowing the Fund to provide economic policy advice to Somalia.
The move opens the way for donors and other development banks to resume relations with Somalia, whose economy is in tatters after more than two decades of conflict.
Donors are expected to meet officials from the World Bank and International Monetary Fund during meetings of world finance leaders in Washington next week.
Christine Lagarde, managing director of the International Monetary Fund, said that the €10bn rescue hammered out between Cyprus and the so-called troika of the European Commission, ECB and IMF would help to “restore the health of the economy”.
The IMF has agreed to contribute €1bn towards the country’s bail-out via a three year loan, of which Britain is liable for 4.51pc.
Ms Lagarde said that the deal would also help the country to restructure its bloated banking sector. She added that protecting customers with deposits of less than €100,000 in the country’s stricken banks was an “important” part of the deal. “Insured depositors (representing over 95 percent of the total number of account-holders in the two affected banks) have been fully protected,” she said.
The Treasury has already flown more than £10m in cash to Cyprus to ensure that British troops and their families stationed in the country have had access to funds amid the financial chaos.
Britain’s new banking watchdog, the Prudential Regulation Authority, brokered a deal this week to rescue 15,000 savers’ deposits held by ailing Cypriot lender Laiki by transferring them to Britain.
Britain and France are the joint fourth biggest financial contributors to the IMF’s rescue fund. However, both countries’ contributions are dwarfed by the United States, which will pay €177m towards Cyprus’s rescue.
Japan, the fund’s second largest contributor, will pay €65.6m, while Germany’s €61.2m share will come in addition to its loans via the EU. The funds are expected to be approved by the IMF’s board in early May.
Cypriot president Nicos Anastasiades warned on Wednesday of “difficult days ahead” as he swore in new finance minister Haris Georgiades.