International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn said the IMF is ready to provide one-third of any joint IMF-European financing package for Greece. Talks on a possible joint loan program are set to begin Monday in Athens and will include representatives of the IMF, the European Union and European Central Bank. "It's really a new starting point of the relationship between Greece and the fund," Mr. Strauss-Kahn said in an interview. "They have asked for this discussion, and this could lead to financial support." Mr. Strauss-Kahn said the IMF hasn't been involved in the financing talks until now, though European officials have been keeping him apprised. On April 18 euro-zone finance ministers agreed to provide up to €30 billion ($40.72 billion) in the first year of any deal, suggesting that the IMF would contribute an additional €15 billion. More broadly, Mr. Strauss-Kahn said the global recovery "is coming stronger and faster than expected, which is good news." The "bad news," he said, is that "it's clearly a multispeed recovery," with Asia growing faster, Europe lagging, and the U.S. in the middle. "In our view, it's really difficult to say that the crisis is over until private demand will be sustainable enough to do the job," Mr. Strauss-Kahn said. "So that's why we're still cautious." One big risk is the buildup of sovereign debt, Mr. Strauss-Kahn said, with Greece as the most obvious example. Stimulus spending has added to government red ink, but Mr. Strauss-Kahn downplayed the significance of that spending over the longer term. He estimated that stimulus spending will account for only about three percentage points of the projected average 35-percentage-point increase in debt-to-GDP among advanced countries by 2014-to 115% from 80% before the crisis. "In any case, without the stimulus, you would have had less growth and an even higher level of debt," he said. Another risk is that inflows into emerging economies could stoke asset bubbles and inflation, Mr. Strauss-Kahn said. "The paradox of this kind of situation is that those countries are facing a problem because of the size of their inflows," he added. But cutting inflows could lead to "an even bigger problem." Mr. Strauss-Kahn said there needs to be an "insurance" mechanism funded by the financial sector, which could be used in future crises, along with clear cross-border rules to unwind failed institutions. The IMF will present a bank tax proposal next week to finance ministers of the Group of 20 leading and developing nations on how fund this "insurance" system."
