Here’s your quick translation of the report that the International Monetary Fund is “considering” a plan to back a special investment vehicle being proposed as part of the expansion of the European Financial Stability Facility.
Translation: The US taxpayer may wind up funding the EFSF bailout fund.
Reuters is reporting that the IMF’s involvement is only at the “considering” stage. No decision has been made.
But you should have already known that because, at this stage, there is no plan officially approved by the EFSF participants. There was going to be a plan announced Sunday but that was put off until Wednesday.
And now it seems that won’t happen Wednesday—perhaps because Angela Merkel is seeking the backing of the full German parliament to negotiate the EFSF expansion.
The reason the IMF involvement means U.S. taxpayers will become involved is that the U.S. is by far the largest source of funding for the IMF. (As a nation state, that is. The 17 nations of the euro zone contribute more as a bloc than the U.S. does.) The U.S. contributes 17.72 percent of the IMF's annual budget.
It's not clear at this stage what role the IMF would play. Would it be partially funding the expansion? Or playing some kind of administrative role? The details will likely make all the difference to whether US politicians balk at using the IMF as part of the Eurozone bailout.
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