Troika to extend the unsustainable Greek debt by decades

The Euorzone leadership remains uneasy with the third bailout of Greece. This unease can be seen in the recent delay to the start of the negotiations, with the Troika staff in Athens siting "technical issues". The actual reason has to do with the fact that Greece's creditors have yet to reach an agreement among themselves. Apparently some Eurozone nations are still pushing for additional requirements that go beyond the austerity measures the Greek parliament recently passed.

The challenges surrounding the new bailout are severe. The intrusive nature of reform enforcement by the creditors is likely to worsen the already intense animosity in Greece toward the Troika institutions.

Bloomberg: - Previous memorandums committing Greece to enforce reforms on everything from the rules of bank recapitalizations to evaluating the “impact of the changes in milk pasteurization and sale procedures,” have prompted dissenters to claim that Greece has turned into a “debt colony.” Creditors argue that changes are necessary to stabilize the country’s finances and set it on course to sustainable growth.

Furthermore, the negotiations will once again be taking place "under the gun" as the next payment to the ECB of over €3bn is due on August 20th.

Assuming the deal will be completed in August as the can gets kicked much further down the road, Greece is being set up for a massive maturity wall, with little chance of principal repayment. And any form of debt principal forgiveness is off the table.

Natixis: - [Greek debt forgiveness] is unlikely to come about given the opposition of many Member States (Germany notably), the position of the Eurogroup over this issue (“nominal haircuts on the debt cannot be undertaken”) and the legal obstacle (measure would be in breach of Treaty). Under these conditions, this leaves one option, namely a re-profiling of Greek debt without touching the principal.

Out of the EUR82bn-EUR86bn lent by the ESM, part could be applied to repurchase the debt held by the ECB and to repay early the IMF (which in total would represent EUR25bn). [It] follows that the financing requirement of the Greek State, assuming there is a 20-year grace period and repayments are spread over 40 years, would correspond to the primary balances and repayments of principal and interest in respect of market debt held by private creditors (i.e. TBills, GGB PSI, new GGB and debt issued under foreign law)

According to Natixis here is what the liability term structure is expected to look like after the completion of this third bailout. How Troika lenders can possibly get comfortable leaving a small nation with this type of a debt profile is unfathomable. And yet, this is the most likely outcome of the upcoming negotiations.

Source: Natixis

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Could business optimism in Greece translate into stabilization?

Last week the International Monetary Fund said it will provide Greece with another installment in the amount of €1.7 billion under the second bailout plan. As the nation complies with troika's bailout provisions, including dismissing thousands of public-sector employees, economic indicators out of Greece continue to worsen. The latest unemployment rate clocked at 27%, resulting in a spectacular drop in consumer spending.

Source: Tradingeconomics (€ million)

The banking system is nearly frozen, as credit to private sector continues to decline (as old loans mature).

Source: Tradingeconomics (€ million)

Manufacturers struggle to bring product to market because they can't finance purchases of raw materials. In many cases neither the banks nor the suppliers are willing to provide credit (except for Iran who lends oil to Greek refiners).

On its own, Greece would do what Japan is currently doing - flood the banking system with excess reserves, force the central bank to buy government debt, and devalue the currency. But as long as the nation is part of the Eurozone, it has no control over the monetary system.

Amazingly, in spite of this full fledged economic depression, surveys are showing improvements in business sentiment and future outlook. When in comes to business conditions, Greeks seem to be at least as optimistic as the rest of the Eurozone, if not more.

Source: JPMorgan

Source: JPMorgan

And the latest overall economic sentiment index has spiked to the highest level since 2009.

The Telegraph: - The debt-gripped nation registered a 93.8 reading on the European Commission's economic sentiment index, putting it above northern European peers Austria, Finland and Denmark, and well above the eurozone average of 89.4.

Greece was among the steepest risers in the survey, which gauges consumer and business confidence, suggesting that pessimism is waning fast as the population pegs hopes on recovery.

Source: Tradingeconomics

Greeks seem to believe that improvements to their nation's conditions are under way. Maybe the hope is that the recapitalization of banks will result in more credit or maybe the tourist season will bring some much needed cash. Whatever the case, any sign of potential stabilization is welcome news.

In the end it's going to be all about how much tax the Greek authorities can collect in order to take the government to 4.5% budget surplus by 2016, as per troika's plan (amazingly, the original plan called for this surplus to to be reached in 2014 - see this article for full discussion). The goal is to one day return to market-based funding. But if the growth trajectory remains anything like it has been and tax receipts stay weak, the earlier tensions with the Eurozone and the IMF will return.

JPMorgan: - If growth remains sluggish, and after the painful fiscal consolidation to date, the question of whether Greece should continue to adjust on the timescale demanded by its European creditors will remain a pointed one.

Let's hope that the recent business optimism in Greece will spur some stabilization - otherwise we are back to square one.

SoberLook.com

From our sponsor:

Egypt's central bank running "dangerously low" on foreign reserves

Egypt is learning the hard way that free elections by themselves do not produce a democratic state (see discussion). Nor do free elections necessarily translate into prosperity. With the new constitution in place and Muslim Brotherhood consolidating power, capital is flowing out of the country. The Egyptian pound (EGP) is under pressure as it hits new lows, while the central bank is spending foreign reserves to keep the pound from collapsing. It's becoming a losing battle.

EGP per one dollar (EGP weakening)

BBC: - Egypt is grappling with a crippling budget deficit and dwindling foreign reserves. The central bank has spent more than $20bn in foreign reserves to support the pound since a revolution against former President Hosni Mubarak in 2011.

With hard currency reserves running tight, the central bank is now imposing currency controls.

Corporations:

BBC: - The central bank also forbid corporate clients from withdrawing more than $30,000 in cash per day ...

Individuals:

Reuters: - Egypt has banned travellers from carrying more than $10,000 in foreign currency in or out of the country, as officials worry over pressure on its pound currency and a rush by Egyptians to withdraw their savings from banks.

Political turmoil over the past month has raised fears among ordinary citizens and investors that the government - which has pushed back talks to seal IMF funding till January - may not be able to get its fragile finances under control.

The uprising drove away tourists and foreign investors alike, freezing growth, pushing the state budget deficit into double digits as a percentage of national output and worsening its balance of payments.

Egypt has asked the IMF for a $4.8bn loan to keep its government and currency afloat.

BBC: - Egypt will soon resume talks with the International Monetary Fund over a crucial $4.8bn (£3bn) loan to shore up the economy, the prime minister says.

Talks were suspended because of political turmoil over a new constitution.

PM Hisham Kandil was speaking as the Egyptian pound reportedly fell to a record low against the US dollar.

The central bank said the country's foreign reserves have dropped to "critical" levels.

It's not clear at this stage if the IMF will provide the funds needed or whether it will be enough to keep the currency from collapsing. The big concern of course is that weakening currency will exacerbate food inflation (Egypt imports some 40% of its food and nearly two thirds of its wheat consumption), causing further civil unrest.

SoberLook.com

From our sponsor:

EMU leaders look for Greek debt restructuring solutions; Germany may need to step up for more than its share

Under pressure from the IMF, the Eurozone leadership is desperately looking for ways to restructure the Greek government debt in a politically "acceptable" way. The IMF has been calling for some form of relief that would put Greece on a more sustainable path. The troika forecasts for Greek recovery in the past have been nothing more than exercises in self deception (see chart from Marc to Market). Realistic estimates put Greek debt at double the GDP some time in 2014 unless there is a restructuring. The IMF charter simply prohibits the fund from providing support to nations without at least some reasonable expectation (even an optimistic one) of recovery.

Lowering rates and extending maturities seems to be the most palatable solution so far.

Businessweek: - “I have preferences and that means no fresh money because it is difficult to explain to our taxpayers,” Austrian Finance Minister Maria Fekter said. She predicted a “mixed package” that could include lower rates, though countries with higher borrowing costs like Spain and Italy would want compensation for any losses on lending to Greece.

And that's one of the places the situation gets sticky. Italy and Spain say they are not in a position to take losses, even if these losses do not involve loss of principal. While funding Greek bonds, Italy and Spain would be paying more in their own borrowing costs than they would receive from the reduced Greek debt coupon. These nations are now pressuring Germany to compensate them for whatever "Greek pain" they may endure.

GS: - German government may be asked to compensate other governments for additional Greek financial support. Reducing interest payments for the Greek government would be one way to narrow the funding gap that has opened up. Lower rates, however, would imply that some governments, notably the Italian and Spanish governments, would have to pay higher rates in funding the Greek help than what they receive in interest payments from the Greek government. One solution, according to press reports, would be that the German government compensates these governments, to some extent at least, for the interest spread. It is not clear whether such a solution would be acceptable to the German government. But it suggests that some difficult questions still need to be answered before the next tranche can be paid out.

It is difficult to imagine the German government telling its citizens that not only is it easing the terms of Greek debt, but the taxpayers are also compensating Italy and Spain (and possibly other nations) for their share of losses. The Greek restructuring numbers are actually relatively small, particularly compared to Germany's government budget. But it is not as much about the numbers as it is about politics. With less than a year before the next general election in Germany, a Greek solution is critically important. At the same time the solution German voters would prefer can not involve additional taxpayer resources (or at least perceived as such).

So the Eurozone leadership continues to dig for other sources of funds. Everything seems to be on the table, including raiding the profits made by the Eurosystem (the ECB and NCBs) on Greek debt. There is even talk of the ECB returning future interest payments on the Greek bonds it holds back to Greece. This is unlikely to be sufficient, but is certainly easier to sell to the voters.

Businessweek: - Finance ministers are also considering how to tap profits made by the ECB and national central banks on Greek bonds, drawing on a February commitment to recycle that money back to Greece. The question of how to treat future ECB profits also has to be addressed.

In spite of dire economic conditions, Greece actually stands a good chance of turning its economy around if the debt burden is reduced (see discussion). The Eurozone has to find a restructuring solution if Greece is to be part of the EMU going forward. And Germany may need to step up once again. As of today, Angela Merkel seems optimistic: “I believe there are chances, one doesn't know for sure, but there are chances to get a solution on Monday...” This should make for an interesting weekend in the euro-land.

SoberLook.com

From our sponsor:

JPMorgan vs. the IMF on global growth forecast

JPMorgan's near-term global GDP growth projection is lower than the IMF's. The difference amounts to about 0.5% in growth a year from now.

Source: JPMorgan

Here is how they differ by country. These do not look like material variances, but they matter in forecasting global growth.

Source: JPMorgan

SoberLook.com

ESM, just like the IMF, will force bond holder subordination

Looking through the statement made by Standard and Poors on Friday, one paragraph stands out.

Standard and Poor's: As we noted previously, we expect eurozone policymakers will accord ESM de-facto preferred creditor status in the event of a eurozone sovereign default. We believe that the prospect of subordination to a large creditor, which would have a key role in any future debt rescheduling, would make a lasting contribution to the rise in long-term government bond yields of lower-rated eurozone sovereigns and may reduce their future market access.

This statement points at the crux of the issues faced by the eurozone bondholders - the risk of becomig subordinated.  But wait, wasn't the concept of "subordination" off the table in the last round of discussions?

It is not easy to assess exactly what is the latest agreement, given the numerous iterations of various negotiations in the eurozone. One thing that has always been clear is that Germany viewed any support provided by the (yet to be formed) European Stability Mechanism (ESM) to a member state of the eurozone as requiring private investor "participation".  In their view private investors had to agree to some form of a "haircut" before ESM provides a loan to a troubled state or take further losses in a default before any losses accrued to ESM. That concept is often described as "private investor subordination".

Reuters (May 25th, 2011): "We have decided on a long-term euro mechanism. And for Germany it is of existential importance that it foresees private sector participation in the event countries are judged insolvent," Merkel told a party conference of her Christian Democrats (CDU) in Berlin.

And the idea of private investor participation was indeed written into the original ESM proposal.

The ESM Term Sheet: An adequate and proportionate form of private-sector involvement will be expected in all cases where financial assistance is received by the beneficiary State. The nature and extent of this involvement will be determined on a case-bycase basis and will depend on the outcome of a debt sustainability analysis, in line with IMF practice, and on potential implications for euro-area financial stability.

Since then, Merkel kept bringing up this concept of "IMF practice" or "IMF rules". So what does it mean to have the ESM consistent with IMF practice?  Let's take Ireland as an example. There is no question that the current holders of Irish government bonds have become subordinated to the IMF.

ISDA: On 18 January 2011 the first drawdown (5.8B EUR) of the IMF loan to the Republic of Ireland occurred (see http://debates.oireachtas.ie/dail/2011/01/20/00067.asp under Point 78). The IMF certainly enjoys de facto preferential creditor status in accordance with its status as an International Financial Institution and the IMF has claimed preferential creditor status with regards to their loan to the Republic of Ireland – see the press conference transcript (http://www.imf.org/external/np/tr/2010/tr120210.htm) and the pg 100 of the IMF report (http://www.imf.org/external/pubs/ft/scr/2010/cr10366.pdf).

In the event that the Republic of Ireland is unable to meet its financial obligations at some point in the future no one denies that the IMF loan will be repaid first or that bondholders will not receive scheduled payments if the IMF loan is in arrears. From a practical perspective the existing Irish bonds have become subordinated to the IMF loan.

ESM in its original form can not buy bonds in the secondary market and has limited ability to participate in the primary markets. It's only approach would be to provide loans to sovereign governments in a fashion similar to IMF and become senior to the bond holders.

This version of ESM is certainly not giving sovereign bond investors a great deal of confidence. Imagine a scenario where Italian bond auctions fail. ESM would step in with a loan to Italy with a prerequisite that existing bond holders take a haircut negotiated with the Italian government in a debt restructuring process.  Now if you are one of those bond holders, you would be facing the Italian government and the ESM backed by Germany and France.  What are your chances of getting a fair deal? We see how well negotiations are playing out in Greece, even with investors agreeing to a 50% haircut and no ISM involvement.

As Europe came close to the brink in autumn of last year, it became clear that the "IMF approach" for ESM needs to change.  After a set of rapid fire negotiations between France and Germany it looked like Germany will indeed capitulate.

The Guardian (Dec 5th): In a major concession from Merkel in what was otherwise a German-inspired package, the leaders agreed that private investors in eurozone debt would not be forced to accept losses in the event of a default, with the exception of the case of Greece, where "haircuts" for the banks and private investors in Greek debt were agreed last July.

In an unexpected move, Berlin and Paris also called for the eurozone permanent bailout fund, the European stability mechanism, to be launched next year rather than in 2013 as previously planned. The Franco-German package is to be turned into a formal joint proposal to be handed to Herman Van Rompuy of Belgium, who is chairing the EU summit on Thursday and Friday. It falls to him to twist arms, and to get the rest of the EU and eurozone to support the package.

The talk was that the facility would only cover newly issued bonds of the eurozone members. Nevertheless ESM now looked more like a true bailout fund, a bazooka, rather than another IMF. The French Prime Minister Francois Fillon went on television the day after to say that "a decision was made by Merkel and Sarkozy that was critical, yet wasn’t sufficiently explained ... Germany agreed to give up the participation of the private sector, private investors, in case of sovereign debt restructuring.”  That's clear enough.  But German officials fired back the same day:

Bloomberg (Dec 6th): Germany rejected comments by French Prime Minister Francois Fillon that Chancellor Angela Merkel agreed to drop demands on investors to accept losses in any sovereign default, saying that International Monetary Fund rules will ensure private-sector involvement.

“We only made it clear that the kind of [private investor participation] you had with Greece is an extreme case that won’t be repeated,” Steffen Seibert, Merkel’s chief spokesman, said by text message late yesterday. So-called collective action clauses “will stay, so the investors will only encounter risks in Europe that they already know from everywhere else in the world.”

By "everywhere else in the world" Germany was insinuating that even after the new treaty, the ESM facility will not be taking a haircut side by side with the bond holders in case of a default, and instead operate like the IMF. But with the news of a potential new eurozone treaty, the markets had since shrugged off this comment, as Italian and Spanish bond markets stabilized.  The recent noise around negotiations with Greece has also drowned out any unresolved problems with ESM. That is until the S&P downgrade raised the issue again. As the structure of the new eurozone treaty emerges in the months to come, the ESM true status will become more clear.  But for now we are back at square one with ESM following the "IMF rules", which clearly (as in the case of Ireland) lead us to the concept of creditor subordination.


SoberLook.com

The eurozone is on it's own in boosting the IMF

The eurozone nations are coming to a realization that getting significant financing from external sources even within the EU will prove to be difficult. In the end they need to step up to create whatever support facilities necessary to keep the the euro intact. And of course it will fall on the wealthier nations to provide the bigger share of the support.

Reuters: "Ministers confirmed today that ... euro area member states will provide 150 billion euros of additional resources through bilateral loans to the fund's general resources account," EU finance ministers said in a statement.

Attached document from the EU finance ministers press release that shows the breakdown of each member state's contribution provided via bilateral loans.  Germany and France together make up nearly 50% of this contribution.

But this contribution is not nearly enough to calm the markets that were looking for 200 billion euros to the IMF.  That target was not met to a large extent because the UK is staying out.  As with the fiscal union proposal, the eurozone is going it alone.   And so far there is no "bazooka".

But even with that, the IMF will likely start developing a strategy shortly to purchase eurozone bonds in the secondary or even the primary markets.

Eurozone Contribution to IMF

SoberLook.com

The France-Germany eurozone proposal - crib notes

The flow of information coming out of Europe has been fairly confusing, particularly when the media reports it in chunks, often not connecting the dots. For the sake of clarity, let's try to summarize the latest agreements between France and Germany that are meant to set the stage for the "new" euro-zone.  We have 8 key points:

1.  France and Germany explicitly ruled out the concept of a Eurozone Bond. This is unfortunate because in the long-term some form of combined debt issuance may help stability.

2.  The latest structure is a modification of the EU treaty to incorporate stricter rules for fiscal discipline. The issue as to who actually signs up still remains. If countries such as the UK choose to stay out, so be it. Rather than signing up the 27 EU states, they will just get going with the 17 euro-zone members. Then others can come in later as they wish.

3.  The fiscal discipline rules would set a hard limit of 3% deficit to GDP. Sanctions would apply based on the European Commission recommendation and would be waived only via the majority vote of member states.

4.  The constitution of each member state would be required to have a balanced budget built in. The European Court of Justice would opine on each state's constitutional requirements to balance the budget in order to determine if such requirement meets the new treaty standard. This part seems incredibly difficult to implement and may bring up sovereignty issues.  There may be significant internal political opposition within some member nations.

5.  European Stability Mechanism (ESM) becomes the main fund structure to provide support for member state bonds. Going forward any member state's new bonds would be the responsibility of that state and the ESM. Private investors holding the bonds would be senior to the ESM and would NOT need to take a haircut as long as ESM is able to cover the principal. The Greece situation would not be repeated, even though Germany originally insisted on a provision that would put private investors on the hook for potential losses alongside with the ESM.

6.  The ESM would be governed via 85% majority vote rather than unanimously as is currently the case. The goal is to avoid a single member from holding back the process.

7.  France and Germany will leave the ECB alone when it comes to its contribution to fighting the crisis. This is where it gets vague because the proposed loan to IMF remains a big question.

8.  Members will hold monthly meetings to address the standardization of labor and social welfare laws (which is meant to "help" other states achieve what Germany has done) as well as to deal with the inevitable euro-zone recession.

SoberLook.com

The euro-zone: we want it all

The summit meeting in Brussels this week has an aggressive agenda and will focus on 3 items:

1. IMF backed by a loan from the ECB to purchase Italian and Spanish bonds in the primary market (effectively a political cover for the ECB to keep purchasing sovereign bonds): EUR100 - EUR200 
2. Fiscal discipline to be embedded in amendments to European treaties.  This is effectively a euro-zone "stability union" as prescribed by Germany and France.
3. Leveraging of the EFSF x2 or x3 - not clear where the funding will come from 

The markets are now pricing in at least one, possibly two of these items being implemented soon, particularly the IMF structure. Spanish spreads have come in sharply:

Spain 5yr spread to Germany (Bloomberg)

Much is riding on this summit meeting as the euro-zone bond crisis is starting to make its way into the real economy.  Spanish PMI has taken a significant downturn.

In the next 6 months Italy will need to roll $276 bn of bonds and Spain $150 bn. That means should the summit fail to achieve its goals this Friday (and the "track record" isn't great), the sovereign bond sell-off will be rapid and violent. Global equity markets would follow.

SoberLook.com

The ECB loan to IMF - a new form of euro-zone QE

Even though some form of a tighter fiscal integration in the euro-zone is still in the works, here is the latest idea being bounced around in Europe to address the crisis immediately.

A few observations on this approach:

• This structure is supposedly going to get around the rules that make it hard for the ECB to buy paper directly. 
• Bond purchases may include new issue or even focus entirely on new issue paper or a direct emergency loan to governments.
• It is in fact a form of QE for the euro.  The ECB is not expected to sterilize a loan this size.
• The US is about 18% on the hook should the sovereigns fail via it's exposure to the IMF
• Germany is going to have a tough time with the idea even if it gets around the ECB restrictions because of their inflation fears. 
• Sovereign spreads are reacting quite positively to this proposal.  Below is the 5-year Spain bond spread to Germany.

5-year Spain bond spread to Germany (Bloomberg)

Later in the day (as expected) we saw resistance to this proposal from US politicians concerned with the US exposure to IMF.  The US has a veto power at the IMF (Germany has been asking the US for a while to give up the veto right) and some politicians want to use this power to stop IMF from taking large sovereign risks (per structure above).

The Hill: “I’m adamantly against the IMF being involved in this,” [Sen. Tom Coburn (R-Okla)] said. “We’re throwing good money after bad down a hole that I think is not a solvable problem,” he said. “Europe is going to default eventually, so why would you socialize their profligate spending,” he added. Coburn estimates the U.S. could be liable for as much as $176 billion if the IMF shores up Italy and Spain and the European Union collapses.

It's not clear how Coburn arrived at $176 billion, but it's definitely going to resonate with the US voters.  Sovereign spreads widened on the news:

French 5yr spread to Germany (Bloomberg)

SoberLook.com

The La Stampa blunder

A massive IMF loan? Maybe not.

BBC: The International Monetary Fund (IMF) has denied it is in talks with Italy about a new bailout loan. 

This has to be one of the biggest journalistic blunders in recent years.   Just because the story came from a NY reporter it has to be right?  What happened to the editorial staff?   La Stampa is the largest and most influential newspaper in Italy, founded in 1867.  Selling a few more papers to ruin your credibility makes no sense. Such action deserves a Sober Look Hype Award, but that honor already went to Moody's this week.

SoberLook.com

La Stampa: IMF is preparing a massive loan for Italy

La Stampa: Da qui la possibilità del varo di un «programma Italia» che, secondo stime circolate negli ambienti dell’Fmi a Washington, potrebbe avere un valore compreso fra 400 e 600 miliardi di euro al fine di dare al governo Monti 12-18 mesi di tempo per varare le necessarie riforme, alleviandolo dalla necessità del rifinanziamento del debito. Garantendo tassi fra il 4 e 5 per cento, l’Fmi offrirebbe all’Italia condizioni assai migliori rispetto ai mercati, dove siamo già oltre il 7-8 per cento, e ciò metterebbe Roma al riparo dalle pressioni in crescendo sui titoli di Stato. L’entità della cifra è tuttavia tale da rendere difficile per il Fmi operare solo sulla base delle risorse attualmente disponibili. Dovrebbero essere incrementate e per farlo ci sono diverse possibilità: dall’emissioni di nuovi Diritti speciali di prelievo a interventi coordinati con la Banca centrale europea guidata da Mario Draghi.

Don't speak Italian? That's OK. This roughly says that the IMF is preparing a loan for Italy in the amount of 400-600 billion Euros at a rate between 4 and 5% (vs. 7-8% they pay now). Italy will have 12-18 months to comply with the IMF imposed reforms.

Two questions remain:
1.  IMF does not have the funds discussed here.  Who is providing them?
2.  Where did LaStampa obtain this information?  No sources seem to be quoted.

If true, this is an unprecedented rescue of a sovereign state by IMF and equity markets should indeed rally.  One however should remain skeptical until some sort of an official statement or a corroborating source becomes available.

SoberLook.com

The new IMF facility Is no bazooka

The IMF announced a new facility today to deal with the eurozone crisis. The member states will be able to borrow short term funds in the amount that is ten times their "member quota". That seems like a big number, but here is the estimate based on recently published quotas. The numbers published are in the IMF's currency called XDR (based on the IMF Special Drawing Rights). Here are the numbers in EUR billion:

Austria	18
Belgium	40
Greece	9
Ireland	11
Italy	68
Portugal	9
Spain	35

This will definitely help, but it's a far cry from the 1 trillion "bazooka" the EU has been working on. Below is a chart of debt maturities for Italy, France, and Spain. The IMF facility limits will be reached fairly quickly.

Source: Barclays Capital

In addition there will be resistance from the US to commit significant incremental capital to Europe's "bailout" - effectively putting the US taxpayer at risk via exposure to the IMF.  It would not be a good move in an election year.