Sunday, 31 July 2011

A Reply from David Willetts MP

"Thank you for your email of 14th July about the UK's IMF contributions. We are a founding member of the IMF and have responsibilities owing to our continued membership. Member states' contributions to the fund are broadly based on their relative size in the world economy, MPs recently approved increasing the amount of the British money that IMF can borrow from £10.7 billion to £20.15 billion. This is in line with rising contributions of other countries and the proposal was initially agreed in 2009, before the Greek debt crisis.

The IMF has never defaulted on a loan provided to it by a contributing country since its foundation. The IMF enjoys a "preferred creditor status" which essentially means the IMF loans are prioritised and repaid ahead of others. These rules would also apply in the very rare case of a country defaulting. This has been a widely known and respected position amongst member governments as well as other official, and private sector, creditors.

On the eurozone, we believe that the UK should not participate in a new eurozone financial assistance package for Greece. The Prime Minister has recently secured an explicit assurance from the European COuncil that any new programme would be supported by eurozone countries and not the EU as a whole. Eurozone bailouts are a matter for eurozone countries and not us. Thank you for contacting me and making making me aware of your concern on this issue."

So, we already agreed the increased contributions in 2009 but didn't vote on the increase until 2010 eh? I find it hard to believe we would agreed something  during one Parliamement and then wait to vote on it during a different Parliament i.e. after a general election.

The IMF never defaults, which is good, but then if a member country defaults, how do the IMF make up the shortfall? By increasing the interest rates for loans to other countries? How is "preferred creditor status" enforced on a country that cannot or will not pay a loan back? How is paying money to a default risk sound business practice. Why should other countries not linked to Greece be expected to bail them out by increased  interest rates?

We're not contributing anything to the eurozone directly, but what about our obligations to the ECB if they agreed a bailout? What if the EU commission agree a bailout, would the UK be obliged to contribute?

No mention at all about any interest we're paying on this money, so I guess the answer to that is yes. The next question is what rate of interest we're paying on it and what rate the IMF are paying us.

What isn't answered in this letter says a lot.

Lots to look into and research methinks.

Anyone want to comment on it and suggest things I can add to my reply to David Willetts?


  1. "On the eurozone, we believe that the UK should not participate in a new eurozone financial assistance package for Greece."

    Rubbish. All they've done is launder the UK's contribution to the bailout through the IMF.

  2. Exactly my point by writing to him in the first place. We're still contributing to bailing out the Eurozone whether its directly, through the IMF, via the ECB or directly as a result of European Commission diktat.

    All the IMF and ECB are doing is disguising the recipient of the money and providing a scapegoat if it all goes pearshaped.


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