The European Central Bank and the eurozone governments have described the statistics at the heart of the row as “partial and misleading” according to this morning’s Financial Times. The analysis has also been described as “biased”, with Elena Salgado, the Spanish finance minister, adding: “They only see the bad part of the debate”.
The figures circulated at the IMF’s executive board meeting yesterday (31 August) show serious damage to European banks’ balance sheets thanks to their holdings of the region’s government debt.
The IMF’s figures use credit default swap prices to calculate the market value of government bonds of Ireland, Greece and Portugal – three countries that are all receiving bailout payments – alongside those of Italy, Spain and Belgium.
Another area of controversy is that on top of this, additional worries could come from the exposure the banks have to each other.
Needless to say the European Central Bank and the governments have rejected the figures while the IMF sticks by them, though it is possible for them to be reassessed and revised.
Until now the two organisations have worked together pretty well – most notably on the rescue packages – and hopefully this is nothing more than a storm in a teacup as the last thing Europe needs is two of its biggest financiers falling out.
