–Adds Comments On ECB Decisions, IMF’s Role

BASEL, Switzerland (MNI) – New emergency stabilization measures
announced early Monday morning by the European Union finance ministers
and the European Central Bank will be sufficient, International Monetary
Fund Managing Director Dominique Strauss-Kahn said here today.

Asked whether the decisions taken would be enough to contain what
was threatening to become another full-blown financial crisis,
Strauss-Kahn replied: “We always think when we do something that it will
be enough, I think it is.”

The EU finance ministers earlier Monday announced a package of
loans and loan guarantees worth as much as E720 billion for Eurozone
members that run into trouble. Of that amount, E440 billion would be
made available by Eurozone member states, E220 billion by the IMF, and
an additional E60 billion would be from an EU-wide fund that already
exists and would not be all new cash.

Almost concurrent to the EU announcement, the ECB said it would
take the unprecedented step of intervening in public and private debt
markets, buying up securities with the aim of addressing segments of the
market it called “dysfunctional.” This would almost certainly include
the sovereign debt of peripheral EMU countries.

The ECB also said it was re-opening fixed-rate full allotment
tender procedures for 3-month and 6-month refinancing operations and
reactivating 7-day and 84-day U.S. dollar liquidity operations.

Financial markets responded favorably this morning to the news as
spreads on non-German sovereign Eurozone debt securities tightened and
the euro bounced.

“I think we have to wait a little more, but I think all this is
rather encouraging,” Strauss-Kahn said. “I think what has been done by
the Europeans yesterday is really a big step forward — bold measures,
those on the side of the EU and on the side of the ECB.”

In particular, the ECB’s decisions are “very, very significant,”
Strauss-Kahn said. The decision to intervene in both public and private
debt markets that are dysfunctional “is part of the global plan it is a
very, very significant move by the ECB and I think all this has been
well managed.”

The IMF will do its part to aid troubled European countries as it
has in the past, he assured. The Fund “will be happy to contribute” to
any European country that asks for help from the newly created fund “and
at the same time comes to the IMF asking for a program.”

“We will do our part … on a country by country basis … and I
think that this will work,” he added.

The terms of any IMF funding under such circumstances would be
“broadly on the basis of what has been done in the past,” Strauss-Kahn
said. “We stand ready to go on the same proportion we did in the past,
which was broadly 2 to 1.”

“If any countries in Europe ask for the European Stabilization
Mechanism to work, it means Europeans … will provide resources and if
we are asked at the same time to set up an IMF program, we will do it
broadly on the basis of 2 to 1,” he reiterated.

–Frankfurt Newsroom, +49-173-315-6588; dbarwick@marketnews.com,
tbuell@marketnews.com

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