Newspaper article The Evening Standard (London, England)

Climbdown by IMF in Row over Bailout Cost

Newspaper article The Evening Standard (London, England)

Climbdown by IMF in Row over Bailout Cost

Article excerpt

Byline: SIMON ENGLISH

A FURIOUS row erupted between the Treasury and the International Monetary Fund over projections from the world finance watchdog which threatened to throw Alistair Darling's Budget into disarray.

After late-night calls last night between high-level officials, the Treasury persuaded the IMF to drop a claim that the cost of the UK banking bailout could spiral to [pounds sterling]200 billion.

That estimate clashes with Darling's own figure -- being confirmed in today's Budget -- that the losses from the bailout could total [pounds sterling]60 billion.

In a damning report on the state of the world's banks yesterday, the IMF reckoned the financial crisis could end up costing governments worldwide more than $4 trillion.

The UK share of this -- what it forecast to be [pounds sterling]200 billion -- amounts to 13.4% of annual gross domestic product, the second highest after Ireland.

The Treasury insisted the figures were wrong, as they ignored fees paid by the banks into government coffers in return for rescue funds and assumed that all losses from the industry would accrue to government coffers.

A Treasury spokesman said: "The Budget will make prudent provision for potential losses from banking interventions in line with our cautious approach to forecasting public finances." After an angry reaction from the Treasury, the IMF pulled the figures which are hugely embarrassing to Darling from its website and conceded the cost of the UK bailout had been incorrectly stated. Its forecast now appears to be "embargoed".

But the Washington-based group, presided over by France's former finance minister Dominique Strauss-Kahn, still argues that Britain needs to explain how it intends to scale back debts, or face rebellion from the bond markets.

"In order to address investor concerns, governments need to clearly communicate the potential costs of financial support packages as part of a sustainable medium-term budget framework," said the IMF. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.