Frequently Asked Questions about IMF
Involvement in the Eurozone Debt Crisis
Rebecca M. Nelson, Coordinator
Analyst in International Trade and Finance
Dick K. Nanto
Specialist in Industry and Trade
Jonathan E. Sanford
Specialist in International Trade and Finance
Martin A. Weiss
Specialist in International Trade and Finance
June 4, 2010
Congressional Research Service
7-5700
www.crs.gov
R41239
CRS Report for Congress
P
repared for Members and Committees of Congress
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Summary
On May 2, 2010, the Eurozone member states and the International Monetary Fund (IMF)
announced an unprecedented €110 billion (about $145 billion) financial assistance package for
Greece. The following week, on May 9, 2010, EU leaders announced that they would make an
additional €500 billion (about $636 billion) in financial assistance available to vulnerable
European countries, and suggested that the IMF could contribute up to an additional €220 billion
to €250 billion (about $280 billion to $318 billion). This report answers frequently asked
questions about IMF involvement in the Eurozone debt crisis.
For more information on the Greek debt crisis, see CRS Report R41167, Greece’s Debt Crisis:
Overview, Policy Responses, and Implications, coordinated by Rebecca M. Nelson.
Congressional Research Service
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Contents
Background on the Eurozone and the IMF................................................................................... 1
What is the Eurozone? ..........................................................................................................1
What is the IMF? .................................................................................................................. 1
Eurozone/IMF Financial Assistance Package for Greece.............................................................. 2
Why did Greece turn to the other Eurozone member states and the IMF for financial
assistance? ......................................................................................................................... 2
What financial assistance is being provided to Greece? ......................................................... 2
What is the U.S. contribution to the IMF loan to Greece? ...................................................... 4
What is the IMF’s creditor status in its loan to Greece?.......................................................... 4
Who bears the risk of the IMF’s loan to Greece? ................................................................... 4
What reforms are part of Greece’s package with the IMF?..................................................... 5
What is unusual about the Greece package with the IMF? ..................................................... 6
What other policy options did Greece have? .......................................................................... 6
Eurozone/IMF Financial Assistance Package for other Eurozone Countries ................................. 7
Why did the Eurozone leaders pledge support to other Eurozone countries? .......................... 7
What financial assistance has been pledged by the EU and the IMF? ..................................... 7
What is the role of the U.S. Federal Reserve? ........................................................................ 8
IMF Resources and Congress’s Role ........................................................................................... 9
How much money does the IMF have to lend? ...................................................................... 9
What is the expanded New Arrangements to Borrow (NAB)?................................................ 9
How does the United States provide money to the IMF?...................................................... 10
What is the role of Congress? .............................................................................................. 10
Implications of the Eurozone Debt Crisis for the United States .................................................. 11
How strong are the economic ties between the United States and the EU? ........................... 11
What is the exposure of U.S. banks to vulnerable European countries? ................................ 12
How has financial instability in the Eurozone affected the value of the dollar?..................... 13
How has the Eurozone instability affected U.S. interest rates? ............................................. 13
How will U.S. economic growth be affected? ...................................................................... 14
How do U.S. government budget deficit and external debt levels compare to those in
vulnerable European countries?........................................................................................ 16
Legislative Developments ......................................................................................................... 18
Has Congress adopted any legislation in light of the IMF loan to Greece? ........................... 18
S.Amdt. 3986................................................................................................................ 18
What other legislation prompted by the IMF loan to Greece is Congress considering? ......... 19
H.R. 5299 and S. 3383 .................................................................................................. 19
H.Con.Res. 279............................................................................................................. 20
Figures
Figure 1. Eurozone/IMF Financial Assistance Package for Greece............................................... 3
Figure 2. US$/Euro Exchange Rate, January 2008 – May 2010 ................................................. 13
Figure 3. Yields (Interest Rates) on U.S. 10-year Treasury Notes ............................................... 14
Congressional Research Service
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Figure 4. Amount of Change in U.S. Real Gross Domestic Product by Component From
First Quarter 2009 to First Quarter 2010................................................................................. 16
Figure 5. Government Budget Deficits, 2010 Forecasts ............................................................. 17
Figure 6. Public Debt, 2010 Forecasts ....................................................................................... 18
Tables
Table 1. U.S. Banking Exposure to Greece, Ireland, Italy, Portugal, and Spain........................... 12
Contacts
Author Contact Information ...................................................................................................... 21
Acknowledgments .................................................................................................................... 21
Congressional Research Service
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Background on the Eurozone and the IMF
What is the Eurozone?
The Eurozone refers to the group of European Union (EU) countries that use the euro (€) as their
national currency. The euro was introduced in 1999 as an accounting currency and in 2002 as
physical currency in circulation. The Eurozone originally included 11 countries and has since
expanded to 16 countries. Greece joined the Eurozone in 2000. Currently, the countries in the
Eurozone include Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
The EU has 27 member states. Denmark, Sweden, and the United Kingdom are members of the
EU that have opted out of joining the Eurozone. All recent entrants to the EU, including Bulgaria,
the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Romania, are required to
adopt the euro as their national currency as soon as possible, but must meet certain economic
policy targets before they are eligible. Budgetary discipline is one of the criteria for joining the
euro. Under the Treaty on European Union, commonly referred to as the Maastricht Treaty, EU
member states are required to stay below a government budget deficit ceiling of 3% of GDP and
external debt ceiling of 60% of GDP. Enforcement by EU authorities has been weak, however,
and many governments have exceeded these ceilings. When the euro was introduced, some raised
concerns about the viability of an economic union that has a common monetary policy but diverse
national fiscal policies.
What is the IMF?
The International Monetary Fund (IMF) is an international financial institution that was created
after World War II to promote exchange rate and monetary stability. The founders aimed to avoid
the beggar-thy-neighbor exchange rate policies and banking instability that deepened the
Depression during the 1930s and the lack of any international mechanism for setting standards or
coordinating policy. The IMF has changed over time as the world financial system has evolved. It
now provides more technical assistance to member countries on banking and finance issues.
However, its principal function is still one of lending money and encouraging reform to help
countries deal with balance-of-payments and financial crises. The main concern is the possible
contagion effects that might bring down other countries if a crisis in a specific country is not
addressed.
The IMF is owned by its member countries, whose votes are proportional to the amount of money
they have subscribed to help fund its operations. The IMF funds its own internal budget from
income earned through its lending program. The disbursements for IMF loans are generally
conditional on the borrower country implementing reforms. Loans are generally disbursed in
phases (“tranches”) in order to encourage compliance with loan conditions. If conditions are not
met, funds are not disbursed. The IMF charges its borrowers a rate of interest roughly equivalent
to the price that major governments around the world pay to borrow funds, and it pays its member
countries interest when it uses their quota resources to fund its loans. Disbursements for its
regular loans, called Stand-By Arrangements (SBA), are repayable in five to eight years.
Repayments for some of the IMF’s more specialized programs may occur over a longer period of
time. Until the mid-1970s, developed countries were frequent borrowers from the IMF. Since
Congressional Research Service
1
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
then, developing countries (particularly emerging markets) have been the principal borrowers.
However, during the recent financial crisis, the IMF lent substantially to several of the newer
members of the European Union (EU), and it has also assisted countries with advanced
economies from time to time.
Eurozone/IMF Financial Assistance Package for
Greece
Why did Greece turn to the other Eurozone member states and the
IMF for financial assistance?
Over the past decade, Greece borrowed heavily in international capital markets to fund
government budget and trade deficits. High government spending, weak revenue collection,
structural rigidities, and loss of competitiveness are typically cited as major factors behind
Greece’s accumulation of debt. Access to capital at low interest rates after adopting the euro and
weak enforcement of EU rules concerning debt and deficit ceilings may also have played a role.
Reliance on financing from international capital markets left Greece highly vulnerable to shifts in
investor confidence. Investors became increasingly nervous in October 2009, when the newly
elected Greek government nearly doubled the government 2009 budget deficit estimate. Over the
next months, the government announced several austerity packages and had successful rounds of
bond sales on international capital markets to raise needed funds. In late April 2010, when the
European Union’s (EU’s) statistical agency, Eurostat, further revised the estimate of Greece’s
2009 deficit upwards, Greek bond spreads spiked and two major credit rating agencies
downgraded Greek bonds. Greece’s debt crisis threatened to spread to other European countries,
including Ireland, Italy, Portugal, and Spain, that may face fiscal challenges similar to Greece.
The Greek government formally requested financial assistance from the 16 countries that use the
euro as their national currency (the Eurozone) and the IMF on April 23, 2010. It was hoped that
the financial assistance, combined with austerity measures, would prevent the Greek government
from restructuring or defaulting on its debt or, more dramatically, from abandoning the euro in
favor of a national currency.
What financial assistance is being provided to Greece?
On May 2, 2010, the Eurozone member states and the IMF announced a three-year, €110 billion
(about $145 billion) financial assistance package for Greece.1 This package takes the form of
loans made at market-based interest rates.
Figure 1 shows the sources of funds for the financial assistance package for Greece. Eurozone
countries are to contribute €80 billion (about $105 billion) in bilateral loans, pending
1 For the Greek financial assistance package and the broader Eurozone financial assistance package, the exchange rate
at the time the package was announced is used (approximately €1 = $1.31 and €1 = $1.27 respectively). Source:
European Central Bank (ECB). However, currency swings are underway, and dollar conversions of data denominated
in euros should be approached as estimates.
Congressional Research Service
2
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
parliamentary approval in some countries. Each of the Eurozone countries (besides Greece) has
pledged a bilateral loan, with the largest bilateral loans pledged by Germany and France (about
$29.3 billion and $22 billion, respectively).
The IMF is to contribute a €30 billion (about $40 billion) loan.2 Of the total, the IMF would draw
half from IMF quota resources (the financial commitment countries make to the IMF upon
joining) and half from bilateral lines of credit pledged by some member countries.
Figure 1. Eurozone/IMF Financial Assistance Package for Greece
Eurozone member state or IMF source of resources, Billion US$
Source: Graphic prepared by CRS using data from Jan Strupczewski, “Factbox - Progress Towards Approving
Emergency Loans to Greece,” Reuters, May 6, 2010; and IMF, “Frequently Asked Questions: Greece,” May 11,
2010, http://www.imf.org/external/np/exr/faq/greecefaqs.htm#q23.
Notes: Eurozone member state commitments are bilateral loans, and some commitments are subject to
parliamentary approval. IMF quota resources and bilateral loans fund a Stand-By Arrangement (SBA) loan for
Greece. Conversion to dollars from euros using exchange rate of €1= $1.318.
It is worth noting that it is not clear how much of the €110 billion (about $145 billion) committed
by the IMF and the Eurozone member states will be used by Greece. The money is disbursed in
phases as Greece meets IMF loan conditions. If IMF officials say that Greece does not meet these
conditions, IMF disbursements will not be made. Alternatively, if creditor confidence in Greece is
restored and Greece can resume selling bonds on international capital markets at reasonable
interest rates, the Greek government may not need to rely on Eurozone and IMF financial
commitments. On the other hand, some economists have predicted that the financial package for
Greece may not be sufficient to prevent Greece from restructuring its debt and/or exiting the
Eurozone.
2 The loan to Greece was approved by the IMF Executive Board on May 9, 2010.
Congressional Research Service
3
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
What is the U.S. contribution to the IMF loan to Greece?
The IMF loan to Greece is to be financed by two different sources of money. Half of the IMF loan
to Greece (about $20 billion) will be financed by IMF quota resources. IMF quotas are the
financial commitments that IMF members make upon joining the IMF and are broadly based on
the IMF member’s relative size in the world economy. The U.S. contribution to IMF quota
resources is 17%. However, we cannot infer that 17% of the IMF loan financed by IMF quota
resources ($20 billion) is from the United States. Once the IMF Executive Board approves a
specific loan, there is an administrative decision made by the IMF as to which countries’ quotas
will be tapped to fund that particular loan. The IMF does not disclose parties on individual
transactions, but over time aims to provide a balanced position for all members.
The other half (about $20 billion) of the IMF loan to Greece is expected to be financed by
bilateral loans. These bilateral loans will become part of the IMF’s supplemental fund, the New
Arrangements to Borrow (NAB), when it becomes operational. They are available now, however,
before the expanded NAB goes into effect. In 2009, the United States enacted legislation to
extend a line of credit worth $100 billion as part of expanding the NAB. However, because the
expanded NAB is not yet operational, this $100 billion line of credit from the United States
cannot be tapped for Greece’s package.
The United States has never lost money on its commitment to the IMF. All U.S. financial
interactions with the IMF are off-budget and, because of accounting factors, do not result in any
net outlays or have any impact on the U.S. federal budget deficit.
What is the IMF’s creditor status in its loan to Greece?
The IMF, like the other international financial institutions, enjoys a de facto preferred creditor
status; member governments grant priority to repayment of their obligations to the IMF over other
creditors. In the case of the Greece loan, IMF loans would be repaid prior to all other creditors.
Financing from European countries will be junior to the IMF’s loan and will have the same status
as existing Greek debt.
Who bears the risk of the IMF’s loan to Greece?
The IMF’s membership as a whole bears any risk from lending to Greece, but, in its
entire history, no member of the IMF has experienced a loss from providing resources to
the IMF, either by lending to the IMF or through the payment of quota subscriptions.
Furthermore, member countries whose quota resources are chosen for a specific IMF loan
have a claim on the IMF’s balance sheet as a whole. Thus, even if U.S. quota is drawn for
the Greece loan, which may be likely, any associated risk to the IMF’s balance sheet due
to the IMF loan to Greece would be shared by all IMF members. The IMF has preferred
creditor status, which means that the IMF, along with other international financial
institutions, is first in line to get repaid by the member country, ahead of other creditors.
Occasionally countries fall into arrears with the IMF, but no member country has lost
money as a result.
Congressional Research Service
4
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Only one country (Sudan) has failed to repay the IMF over a sustained period of time. The IMF
absorbed that loss from its reserves or internal resources and no member country lost money as
result.
What reforms are part of Greece’s package with the IMF?
The IMF does not disburse the full amount of its loans to governments at once. Instead, the IMF
will divide the loan into tranches (French for “slice”) and will only disburse the next tranche after
verifying that the specified economic policy reforms have been met. Urging policy reforms in this
way ensures that the loans will be repaid to the IMF, and that the required economic reforms are
implemented.
The IMF program for Greece calls for substantial reductions in government spending as well as
revenue increases. Overall, the package aims to reduce Greece’s government budget deficit from
13.6% of GDP in 2009 to below 3% of GDP by 2014. The IMF has referred to this program as
unprecedented in terms of the adjustment effort required by the government.3 Some of the key
reforms included in Greece’s program with the IMF are listed below.
Key Elements of the Greece’s Reform Package with the IMF
• Government revenues. Revenue measures are to yield 4% of GDP through 2013 by raising the value-added
tax and taxes on luxury items, tobacco, and alcohol, among other items.
• Revenue administration and expenditure control. The Greek government is to strengthen its tax
collection and raise contributions from those who have not carried a fair share of the tax burden. It is to
safeguard revenue from the largest tax payers and strengthen budget controls. The total revenue gains and
expenditure savings from these structural reforms are expected to gradual y total 1.8% of GDP during the
program period.
• Financial stability. A Financial Stability Fund, funded from the external financing package, is being set up to
ensure a sound level of bank equity.
• Entitlement programs. Government entitlement programs are to be curtailed; selected social security
benefits are to be cut while maintaining benefits for the most vulnerable.
• Pension reform. Comprehensive pension reform is proposed, including by curtailing provisions for early
retirement.
• Structural policies. Government to modernize public administration, strengthen labor markets and income
policies, improve the business environment, and divest state enterprises.
• Cut military spending. The plan envisages a significant reduction in military expenditure during the period.
Source: IMF, “Europe and IMF Agree €110 Billion Financing Plan With Greece,” May 2, 2010,
http://www.imf.org/external/pubs/ft/survey/so/2010/car050210a.htm.
In the end, IMF involvement was reportedly a key condition of German Chancellor Merkel’s
willingness to provide financial assistance to Greece. Some argue that the policy reforms
(conditionality) attached to an IMF loan would lend additional impetus to reform and provide
3 IMF, “Frequently Asked Questions: Greece,” May 11, 2010, http://www.imf.org/external/np/exr/faq/greecefaqs.htm.
Congressional Research Service
5
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
both the Greek government and the EU with an outside scapegoat for pushing through politically
unpopular reforms. The EU would also make policy reforms a condition of loans, but the IMF is
seen as more independent than the EU and has more experience in resolving debt crises than the
EU. Some have also argued that IMF participation also reportedly enabled Eurozone countries to
agree more easily on the terms and conditions of the loan program than might have been the case
had they had to arrange it separately.
What is unusual about the Greece package with the IMF?
On the one hand, the IMF loan to Greece is a standard IMF program. The IMF lends to countries
facing balance-of-payment difficulties, and it is widely agreed that Greece was facing substantial
balance-of-payments problems. Greece, as a member of the IMF, is entitled to draw on IMF
resources, pending approval by the IMF management. The procedure by which Greece obtained
its loan from the IMF was standard, as was the specific IMF loan instrument to Greece (a three-
year Stand-By Arrangement [SBA]).
On the other hand, Greece’s program with the IMF is unusual for two reasons. First, since the late
1970s, the IMF has not generally lent to developed countries and has never lent to a Eurozone
member state since the euro was created. That said, the IMF has had programs with countries in
Europe before but, with the exception of Iceland’s IMF program in 2008, IMF involvement in
Europe has not been recent. For example, in the 1970s, the IMF had programs with the United
Kingdom, Spain, and Italy. In the early 1980s, the IMF also had a program with Portugal.
Second, Greece’s program with the IMF is unusual for its relative magnitude. The IMF has
general limits on the amount it will lend to a country either through an SBA or Extended Fund
Facility (EFF), which is similar to an SBA but for countries facing longer-term balance-of-
payments problems. The IMF’s guidelines for limits on the size of loans for SBAs and EFFs are
200% of a member’s quota annually and 600% of a member’s quota cumulatively.4 IMF quotas
are the financial commitments that IMF members make upon joining the IMF and are broadly
based on the IMF member’s relative size in the world economy. In “exceptional” situations, the
IMF reserves the right to lend in excess of these limits, and has done so in the past. The IMF’s
loan to Greece is indeed exceptional access at 3,200% of Greece’s IMF quota and is the largest
access of IMF quota resources granted to an IMF member country.5 Previously, the largest access
had been granted to South Korea during the Asian financial crisis in the 1990s, at nearly 2,000%
of Korea’s quota resources.
What other policy options did Greece have?
Greece is addressing its sovereign debt crisis through a mix of fiscal austerity measures and
structural reforms to improve the competitiveness of its industries. Many believe that the
measures being implemented by the Greek government will lead to low levels of economic
growth and increase unemployment. Financial assistance from the other Eurozone member states
and the IMF is allowing the adjustment to take place over a longer period of time.
4 IMF, “IMF Quotas,” March 11, 2010, http://www.imf.org/external/np/exr/facts/quotas.htm.
5 IMF, “IMF Reaches Staff-level Agreement with Greece on €30 Billion Stand-By Arrangement,” press release, May 2,
2010, http://www.imf.org/external/np/sec/pr/2010/pr10176.htm.
Congressional Research Service
6
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Greece could have addressed its sovereign debt crisis by restructuring its debt or by leaving the
Eurozone. Some economists believe that Greece may still be forced to pursue one or both of these
policy options. Debt restructuring, for example by negotiating with its bond holders to extend the
maturity of Greek bonds or to take a cut in debt repayments, would alleviate immediate pressure
on the Greek government’s debt payments. However, debt restructuring could accelerate the
contagion of the crisis to other Eurozone countries, as well as hinder Greece’s ability to regain
access to capital markets in the future.
Greece could also have addressed its sovereign debt crisis by leaving the Eurozone. This would
require abandoning the euro, issuing a new national currency, and allowing the new national
currency to depreciate against the euro. The Greek government would also probably have to put
restrictions on bank withdrawals to prevent a run on the banks during the transition from the euro
to a national currency. It is thought by some that a new national currency depreciated against the
euro would spur export-led growth in Greece and offset the contractionary effects of fiscal
austerity. Since Greece’s debt is denominated in euros, however, leaving the Eurozone in favor of
a depreciated national currency would raise the value of Greece’s debt in terms of national
currency and put pressure on other vulnerable European countries. Additionally, some argue that a
Greek departure from the Eurozone would be economically catastrophic, lead to contagion to
other European countries facing similar circumstances, and have serious ramifications for
political relations among the European states and future European integration.
Eurozone/IMF Financial Assistance Package for
other Eurozone Countries
Why did the Eurozone leaders pledge support to other Eurozone
countries?
Despite the enactment of the Eurozone/IMF assistance package for Greece, investor concerns
about the sustainability of Eurozone debt deepened during the first week of May 2010. Driven
down by such fears, global stock markets plunged sharply on May 6, 2010, and the euro fell to a
15-month low against the dollar. Seeking to head off the possibility of contagion to countries such
as Portugal and Spain, EU finance ministers agreed to a broader €500 billion (about $636 billion)
“European Financial Stabilization Mechanism” on May 9, 2010. Some analysts assert that such a
bold, large-scale move had become an urgent imperative for the EU in order to break the
momentum of a gathering European financial crisis. Investors initially reacted positively to the
announcement of the new agreement, with global stock markets rebounding on May 10, 2010, to
regain the sharp losses of the week before.
What financial assistance has been pledged by the EU and the IMF?
The bulk of the European Financial Stabilization Mechanism package consists of a “Special
Purpose Vehicle” under which Eurozone countries could make available bilateral loans and
government-backed loan guarantees totaling up to €440 billion (about $560 billion) to stabilize
the euro area. The agreement, which expires after three years, requires parliamentary ratification
in some Eurozone countries. The mechanism additionally allows the European Commission to
raise money on capital markets and loan up to €60 billion (about $76 billion) to Eurozone states.
Congressional Research Service
7
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Previously, such a procedure could only be applied to non-Eurozone members of the EU, and was
used after the global financial crisis to improve the balance-of-payments situations of Latvia,
Hungary, and Romania. Lastly, the European Central Bank (ECB) may take on a more significant
new role; if necessary to increase market confidence, the ECB can now buy member state bonds,
an activity in which it has not previously engaged.
EU leaders announced the European Financial Stabilization Mechanism and suggested the IMF
could contribute up to an additional €220 billion to €250 billion (about $280 billion to about $318
billion). This is in line with the Greece package, where the Eurozone states contributed roughly
two-thirds and the IMF one-third of the total. IMF Managing Director John Lipsky reportedly
later clarified the news reports about the IMF contribution to the European Financial Stabilization
Mechanism, saying that these pledges were “illustrative” of the support that the IMF could
provide.6 Reportedly, Lipsky reiterated that the IMF only provides loans to countries that have
requested IMF assistance and that Greece is the only Eurozone country to date that has requested
IMF assistance.7
What is the role of the U.S. Federal Reserve?8
On May 9, 2010, the Federal Reserve (Fed) announced the re-establishment of temporary
reciprocal currency agreements, known as swap lines, with the European Central Bank, Bank of
Canada, the Bank of England, Bank of Japan, and the Swiss National Bank.9 Under these
agreements the Fed swaps dollars for foreign currencies for a fixed period of time with interest
being paid to the Fed on the dollar amounts involved. The swaps are repaid at the exchange rate
at the time of the original swap, meaning that these repayment amounts are not affected by
changes in exchange rates while the swap is outstanding. Thus, there is no exchange rate risk and,
except in the unlikely event that the borrowing country's currency becomes unconvertible in
foreign exchange markets, there is also no credit risk involved for the Fed. The highest recent
outstanding amount was approximately $583 billion in December 2008.
The swap lines are intended to provide liquidity to banks in non-domestic denominations. For
example, many European banks have borrowed in dollars to finance dollar-denominated
transactions, such as the purchase of U.S. assets. Normally, foreign banks could finance their
dollar-denominated borrowing through the private inter-bank lending market. Such private
lending markets, however, have greatly diminished, if not disappeared, in periods of crisis over
the past few years. Thus, central banks at home and abroad have taken a much larger role in
directly providing liquidity to banks. The swap lines with the Federal Reserve provide foreign
central banks with a source of dollar liquidity should such liquidity be needed.
6 Bob Davis, “IMF’s Reach Spreads to Western Europe,” Wall Street Journal, May 10, 2010.
7 Ibid.
8 Section prepared by Marc Labonte, Specialist in Macroeconomic Policy, Government and Finance Division, x7-0640.
For more on the Federal Reserve, see CRS Report RL30354, Monetary Policy and the Federal Reserve: Current Policy
and Conditions, by Marc Labonte.
9 In response to the beginnings of the recent financial crisis, similar swap lines were established in December 2007 and
expired in February 2010. On the re-establishment of these lines, see Federal Reserve, “Federal Reserve, European
Central Bank, Bank of Canada, Bank of England, and Swiss National Bank Announce Reestablishment of Temporary
U.S. Dollar Liquidity Swap Facilities,” http://www.federalreserve.gov/newsevents/press/monetary/20100509a.htm and
Federal Reserve, “FOMC Authorizes Re-establishment of Temporary U.S. Dollar Liquidity Swap Arrangement with
the Bank of Japan,” http://www.federalreserve.gov/newsevents/press/monetary/20100510a.htm.
Congressional Research Service
8
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
IMF Resources and Congress’s Role
How much money does the IMF have to lend?
In April 2009, the G-20 Leaders and the International Monetary and Financial Committee agreed
to increase the resources available to the IMF through immediate bilateral financing from
members and to subsequently expand the NAB and make it more flexible.10 Resources from new
bilateral contributions are available and being drawn on for current IMF programs. The expanded
NAB is not yet operational.
As of May 6, 2010, the IMF has about $272 billion dollars immediately available to lend.11 This
figure is the IMF’s one-year forward commitment capacity (FCC), which measures the IMF’s
ability to make new non-concessional resources available to members over the next 12 months.
This includes, among other sources, unused quota resources, currently active bilateral loans to the
IMF from several advanced economies, and note purchase agreements with three large emerging-
market countries.12
What is the expanded New Arrangements to Borrow (NAB)?
Created in the late 1990s, the New Arrangements to Borrow (NAB) is a supplemental fund that
the IMF can use to finance loans under exceptional circumstances that pose a threat to the
international monetary system. The G-20 proposed in April 2009 that the existing NAB be
expanded and made more flexible in light of increased demand for IMF assistance. Following a
year of negotiations on the design and operations of the expanded NAB, the IMF Executive
Board adopted a proposal on April 12, 2010, by which the NAB would be expanded to about
$550 billion, with the addition of 13 new participating countries.13 The U.S. commitment to the
expanded NAB is $100 billion and the necessary authorizations and appropriations were enacted
in FY2009.14
Despite U.S. approval of its contribution to the expanded NAB in FY2009, the expanded NAB is
not yet operational and U.S. resources pledged to it cannot be activated until a sufficient number
of current and new participants provide formal consent. Participating in the expanded NAB
10 CRS Report R40578, The Global Financial Crisis: Increasing IMF Resources and the Role of Congress, by Jonathan
E. Sanford and Martin A. Weiss.
11 183 billion IMF Special Drawing Rights (SDRs). See IMF Financial Activities – Update May 6, 2010, available at:
http://www.imf.org/external/np/tre/activity/2010/050710.htm.
12 The FCC is determined by the IMF’s usable resources (including unused amounts under loans and note purchase
agreements), plus projected loan repayments over the subsequent twelve months, less the resources that have already
been committed under existing lending arrangements, less a prudential balance of 20% of the quotas of members that
issue the currencies that are used in the financing of IMF transactions to “safeguard the liquidity of creditors’ claims
and take account of the potential erosion of the IMF’s resource base.” See IMF Financial Activities – Update May 6,
2010 for additional definitions.
13 IMF Executive Board Approves Major Expansion of Fund’s Borrowing Arrangements to Boost Resources for Crisis
Resolution, International Monetary Fund, April 12, 2010.
14 To meet the U.S. $100 billion commitment to the expanded NAB, as well as an $8 billion increase in the U.S. quota
at the IMF, Congress appropriated $5 billion in the FY2009 Spring Supplemental Appropriations for Overseas
Contingency Operations (P.L. 111-32).
Congressional Research Service
9
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
involves domestic approval procedures in many countries, including legislative approval before
they can consent or adhere to the expanded NAB. The IMF has not published the status of NAB
approvals. Once the expanded NAB becomes operational, the bilateral loan and note purchase
agreements would be folded into the NAB.
If and when the expanded NAB becomes operational, the process for approving use of NAB
resources will change. Under the current NAB, NAB resources can be used if approval is secured
from: (1) NAB participants representing 80% of total NAB credit arrangements; and (2) members
of the IMF Executive Board representing 50% of the voting share. Use of NAB resources is
currently considered on a loan-by-loan basis. Under the current NAB, the United States does not
have sufficient voting power to unilaterally veto use of NAB resources.
Under the expanded NAB, the NAB would be activated for a period of time (up to six months).
During this “activation period,” calls can be made on the NAB without additional consent by the
NAB participants or the IMF Executive Board. To activate the expanded NAB, it will be
necessary to secure approval from: (1) NAB participants representing 85% of total NAB credit
arrangements eligible to vote; and (2) members of the IMF Executive Board representing 50% of
the voting share. Under the expanded and modified NAB, the United States will be able to
unilaterally veto activating the NAB. If the expanded and modified NAB is activated, however,
the United States will not be able to dictate or vote on which loans approved by the IMF
Executive Board can be financed with NAB resources during the activation period.
How does the United States provide money to the IMF?
Since 1945, the United States has subscribed about $55 billion as its quota in the IMF. The
Bretton Woods Agreements Act provides that, unless Congress agrees by law, the United States
cannot provide money or subscribe resources to the IMF. Over the years, Congress has passed
several laws authorizing the Secretary of the Treasury to agree that the United States will
participate in IMF funding agreements and authorizing and appropriating the necessary funds.
Congress has used a variety of budgetary arrangements to provide this money. A country’s quota
in the IMF is a line of credit, which is available to the IMF upon request when it needs money to
fund a loan to one of its borrower countries. When the IMF wishes to draw against the U.S. quota,
it asks the New York Federal Reserve Bank to transfer money from the Treasury Department’s
account to its account so it will have the resources necessary for that loan. The IMF usually draws
on the resources of several countries to fund its loans. U.S. financial relations with the IMF are
off-budget. For accounting reasons, payments to the IMF from U.S. quota resources have no
outlay effect and no impact on the federal budget deficit. As loans are repaid to the IMF, it
transfers the borrowed funds back to the United States. The IMF pays the United States and other
countries interest on the outstanding balance whenever it uses their quota resources.
What is the role of Congress?
Once Congress has approved U.S. participation and provided appropriated funds to back an
additional U.S. subscription, it has no further role in the IMF lending process. Neither individual
loans nor the IMF’s ability to draw against U.S. quota resources must be approved in advance by
Congress. At the time the United States subscribes to new quota resources, it may not put
restrictions on the ways the IMF may use those funds, as this would violate the terms of the IMF
funding agreements. Congress may enact legislation requiring the U.S. executive director at the
Congressional Research Service
10
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
IMF to oppose loans to specific countries or for specific purposes. However, with 16.8% of the
total vote, the United States cannot by itself block approval of loans by the IMF Executive Board.
Implications of the Eurozone Debt Crisis for the
United States
How strong are the economic ties between the United States and
the EU?
The United States and the European Union (EU) economic relationship is the largest in the
world—and it is growing.15 The modern U.S.-European economic relationship has evolved since
World War II, broadening as the six-member European Community expanded into the present 27-
member European Union. The ties have also become more complex and interdependent, covering
a growing number and type of trade, investment, and financial activities.
In 2008, $1,571.2 billion flowed between the United States and the EU on the current account, the
most comprehensive measure of U.S. trade flows. The EU as a unit is the largest merchandise
trading partner of the United States. In 2008, the EU accounted for $274.5 billion of total U.S.
exports (or 21.1%) and for $367.9 billion of total U.S. imports (or 17.5%) for a U.S. trade deficit
of $93.4 billion. The EU is also the largest U.S. trade partner when trade in services is added to
trade in merchandise, accounting for $198.3 billion (or 36.4% of the total in U.S. services
exports) and $152.1 billion (or 37.6% of total U.S. services imports) in 2008. In addition, in 2008,
a net $148.2 billion flowed from U.S. residents to EU countries into direct investments, while a
net $181.1 billion flowed from EU residents to direct investments in the United States.16
15 For more information, see CRS Report RL30608, EU-U.S. Economic Ties: Framework, Scope, and Magnitude, by
William H. Cooper.
16 Data from CRS Report RL30608, EU-U.S. Economic Ties: Framework, Scope, and Magnitude, by William H.
Cooper.
Congressional Research Service
11
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
What is the exposure of U.S. banks to vulnerable European
countries?
Table 1. U.S. Banking Exposure to Greece, Ireland, Italy, Portugal, and Spain
Amounts Outstanding, Billions of US$, End-2009 Quarter 4
Country Amount
Greece 16.6
Ireland 58.6
Italy 53.8
Portugal 5.0
Spain 52.7
Total 186.7
Source: Bank for International Settlements (BIS), “Consolidated International Claims of BIS Reporting Banks,”
provisional data for end-2009 Q4 (most recent data available), Table 9B: Consolidated Foreign Claims of
Reporting Banks - Immediate Borrower Basis, http://www.bis.org/statistics/consstats.htm.
Notes: Provisional data.
This table shows only direct bank lending. What is generally not known is the exposure of U.S.
financial institutions through issuance of credit default swaps based on Greek sovereign debt. The
effect of credit default swaps could be to lower U.S. bank exposure to sovereign debt by
offsetting U.S. bank liabilities or to raise U.S. bank exposure to sovereign debt if U.S. banks sold
credit protection.17
17 For more on credit default swaps, see CRS Report RS22932, Credit Default Swaps: Frequently Asked Questions, by
Edward V. Murphy and Rena S. Miller.
Congressional Research Service
12
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
How has financial instability in the Eurozone affected the value of
the dollar?
Figure 2. US$/Euro Exchange Rate, January 2008 – May 2010
Source: European Central Bank (ECB).
Some expect that if investors lose confidence in the future of the Eurozone, and more current
account adjustment is required for the Eurozone as a whole, the value of the euro will weaken.
Already, the euro has depreciated in recent months against the U.S. dollar (Figure 2), falling by
19% between December 12, 2009, and June 2, 2010 (from 1.51 $/€ to 1.22 $/€). A weaker euro
would likely lower U.S. exports to the Eurozone and increase U.S. imports from the Eurozone,
widening the U.S. trade deficit. On the other hand, it will make purchases and U.S. investments in
Eurozone countries cheaper in dollar terms.
Since the Chinese renminbi has been tied to the value of the dollar, when the dollar appreciates
against the euro, the renminbi also does so. This raises the price of Chinese exports to the
Eurozone and lowers the price of European exports to China. This exchange rate effect not only
affects China’s trade with Europe, but it could make the United States a more attractive market
for products from China.
How has the Eurozone instability affected U.S. interest rates?
Since U.S. Treasury securities are considered to be a safe haven for investors during times of
economic turmoil, the immediate effect of the Greek crisis was for investors to reduce their
exposure to euro-denominated investments, particularly those issued by Greece, and invest some
of those funds in U.S. Treasuries. This caused a greater inflow of funds into the United States and
caused the yield on 10-year Treasury notes to fall by about one-third of a percentage point (see
Figure 3). If these lower interest rates persist, U.S. borrowers, including the U.S. Treasury and
Congressional Research Service
13
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
those seeking mortgages, will benefit. In June 2010, some long-term mortgage interest rates had
fallen to as low as 4.25%. For those who rely on interest bearing assets for income, however,
lower interest rates reduce the yields they receive on bonds and other securities. In the future,
though, if Eurozone member states default on loans to leveraged banks, global credit markets may
shrink by a multiple of the losses as banks deleverage.18 If this occurs, global interest rates,
including those in the United States, could rise.19
Figure 3. Yields (Interest Rates) on U.S. 10-year Treasury Notes
Source: CRS with data from U.S. Treasury.
How will U.S. economic growth be affected?
The Eurozone instability is affecting the U.S. economy through several economic and financial
linkages. The first is in capital flows into the “safe haven” of U.S. Treasury securities and causing
lower interest rates as addressed above. The second is in international trade flows. Slower growth
in the Eurozone likely will lead to lower U.S. exports there, while the fall in the value of the euro
may further reduce the quantity of U.S. exports to the Eurozone but increase U.S. imports from
Europe and travel expenditures there. Slower growth in the Eurozone also is reducing demand for
petroleum and lowering the price of oil and other commodities. This will tend to reduce the U.S.
import bill for petroleum and tend to increase consumer confidence in the United States. The
Eurozone instability, however, also has increased the risk level with respect to sovereign and
18 For example, see Frederic S. Mishkin, “On ‘Leveraged Losses: Lessons from the Mortgage Meltdown’,” Speech at
the U.S. Monetary Policy Forum, New York, New York, February 29, 2008,
http://www.federalreserve.gov/newsevents/speech/mishkin20080229a.htm.
19 For more on this point, see CRS Report RL34412, Containing Financial Crisis, by Mark Jickling.
Congressional Research Service
14
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
other debt and has increased volatility in stock markets. While such volatility in the short-term
may not affect the overall level of consumption and investment in the United States, a large drop
in equity values may reduce consumption through the wealth effect as stockholders see their
wealth levels shrink and attempt to save more. Corporations also may find that raising funds for
investments through new offerings of stock becomes more difficult.
Figure 4 shows the amount that real U.S. gross domestic product (GDP) has changed between
first quarter 2009 to first quarter 2010. During this time, real GDP increased by $329.3 billion.
This consisted of an increase in consumption of $163.5 billion, an increase in investment of
$119.3 billion, an increase in net exports of $19.5 billion, and an increase in government
expenditures of $38.1 billion.
How will a drop in interest rates and price for petroleum combined with increased risk and a
weaker euro affect household consumption, the largest component in GDP? Economists expect
that lower interest rates will provide a further boost to pent-up demand for consumer durables, the
purchase of which tended to be postponed during the recession. Consumption is expected to
increase in line with GDP. Investment, both by businesses in new plant and equipment and
households in residential structures, is a key to U.S. recovery. As can be seen in Figure 4, the
increase in U.S. investment over the past year has been in inventory accumulation as businesses
restocked shelves in anticipation of rising sales. Growth in investments in plant and equipment
and in housing has been negative. Lower interest rates provide a positive boost to investments in
general, but business expectations of less export demand from Europe and increased risk of
another global slowdown in growth may work to curtail new investments in production capacity.
As for trade, the drop in the value of the euro and weakened demand in the Eurozone are likely to
increase the U.S. trade deficit beyond that expected as U.S. consumption of imports rises. With
the exception of lower interest rates on borrowing, government spending, particularly at the state
and local level, does not appear to be significantly affected by the Eurozone instability.
The combined effect of these positive and negative forces on U.S. growth is difficult to ascertain,
but assuming that the crisis is contained, the net effect arguably will be not large and more
negative than positive. IHS Global Insight stated that it thinks “the fallout from the Greek crisis
for the United States is likely to be relatively small, mostly in the form of loss of competitiveness
for U.S. exporters relative to a euro that should remain weak for the foreseeable future.” It
expects that the Eurozone crisis “will dent the U.S. recovery, but not derail it” and expects the
growth rate of U.S. GDP to fall from 3% in first quarter 2010 and about 4% in second quarter of
2010 into the 2.5–3.0% range during the second half of 2010.20 (The U.S. GDP contracted by
2.4% in 2009.) The Economist Intelligence Unit expects U.S. growth to be 3.3% in 2010.21
If, however, the Greek debt crisis is not contained and spreads to countries, such as Spain and
Portugal, the effect on the United States could be considerably larger.
20 IHS Global Insight, U.S. Executive Summary, Aegean Contagion?, May 2010; and U.S. Economy, Economic
Commentary: GDP, updated May 27, 2010, accessed June 2, 2010.
21 Economist Intelligence Unit, Forecast for the United States of America, 2010. Accessed June 2, 2010.
Congressional Research Service
15
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Figure 4. Amount of Change in U.S. Real Gross Domestic Product by Component
From First Quarter 2009 to First Quarter 2010
Source: Congressional Research Service with data from U.S. Department of Commerce via IHS Global Insight.
Notes: In billions of chained 2005 dollars, seasonally adjusted. GDP equals consumption plus investment plus
exports minus imports plus government spending. Subcategories for investment (non-residential, residential, and
inventory) and government spending (federal and state and local) are listed. Numbers may not add due to
statistical discrepancies.
How do U.S. government budget deficit and external debt levels
compare to those in vulnerable European countries?
Some are concerned that Greece’s debt crisis foreshadows the United States’ future. It is
important to note that the sustainability of a government’s debt depends on a host of different
factors, such as the flexibility of the exchange rate, the currency in which the government has
borrowed, and when the debt is falling due, among others. What may be sustainable for a
particular government in a particular time may not be true for other governments. Some have
suggested, for example, that although the U.S. budget deficit situation is similar to those in
vulnerable European countries, the U.S. fiscal position may be stronger than these other countries
because, for example, the United States has a floating exchange rate, the dollar is an international
reserve currency, the U.S. overall level of debt (as a percentage of GDP) is lower, and economic
growth is (albeit slowly) returning in the United States.22 The United States is also considered a
22 E.g., see Paul Krugman, “We’re Not Greece,” New York Times, May 13, 2011.
Congressional Research Service
16
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
safe haven for investments, making U.S. bonds attractive on private international capital markets
and making it easier for the U.S. government to rollover its debt.
Figure 5. Government Budget Deficits, 2010 Forecasts
% of GDP
Source: Economist Intelligence Unit (EIU) Country Reports, April 2010.
Notes: Forecasts.
Congressional Research Service
17
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Figure 6. Public Debt, 2010 Forecasts
% of GDP
Source: Economist Intelligence Unit (EIU) Country Reports, April 2010.
Notes: Forecasts. Net public debt for Portugal and the United States.
Legislative Developments
Has Congress adopted any legislation in light of the IMF loan to
Greece?
S.Amdt. 3986
On May 17, 2010, the Senate adopted (94-0) an amendment (S.Amdt. 3986) to S. 3217, the
Restoring Financial Stability Act of 2010, introduced by Senator John Cornyn. The Senate passed
its version of the financial regulatory reform bill (H.R. 4173), which included S.Amdt. 3986 on
May 20, 2010. Conference negotiations between the House and the Senate are expected to begin
shortly.
The amendment, titled “Restrictions on Use of Federal Funds to Finance Bailouts of Foreign
Governments,” directs the U.S. Executive Director (USED) at the IMF to evaluate any IMF loan
to a country where the public debt exceeds the gross domestic product (GDP), determine and
certify to Congress whether the loan will be repaid, and use the voice and vote of the United
States to oppose such IMF loans.
Congressional Research Service
18
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
As written, the impact of the loan is unclear. On one hand, there is a strong record of countries
repaying their loans to the IMF. The IMF is the senior creditor in debt situations and as such will
be repaid before first other creditors are paid. Only three countries, Somalia, Sudan, and
Zimbabwe, are currently in arrears to the IMF, and no member country has experienced a loss
from providing resources to the Fund. On the other hand, the amendment appears to requires U.S.
officials to have more certain knowledge about the future than is possible. Since it is impossible
for the U.S. Executive Director to determine and certify to Congress whether an IMF loan will be
repaid prior to the loan being made, it is unclear whether the United States would be required to
oppose all future IMF loans to countries where public debt exceeds GDP. By itself, U.S.
opposition to an IMF loan is not sufficient to prevent the loan from being approved by the
Executive Board.
Large IMF packages to developed countries appear to be the Amendment’s focus of concern.
However, the provision would apply to all countries where public debt exceeds GDP and this may
inadvertently require the United States to oppose IMF loans to other heavily-indebted countries.
As of 2009, nine countries had public debt burdens greater than their GDP.23 Several low income
countries are near that level and might exceed it if their GDP levels shrank in the midst of a
financial crisis that would prompt them to seek IMF assistance.
What other legislation prompted by the IMF loan to Greece is
Congress considering?
Three pieces of legislation have been introduced to address issues arising from the IMF loan to
Greece. Two would seek to block any use of IMF resources, including those from the expanded
NAB, to fund loans to EU member countries. The third would express opposition to any use of
U.S.-provided funds to help support assistance under the proposed EU stability plan.
H.R. 5299 and S. 3383
On May 13, 2010, Representative Mike Pence introduced H.R. 5299, a bill titled the “European
Bailout Protection Act.” Senator Jim DeMint introduced a companion bill, S. 3383, on May 18,
2010. Sec. 2 would require the Secretary of the Treasury to oppose any activation of the expanded
New Arrangements to Borrow (NAB) facility that would fund directly or indirectly an IMF loan
to a member country of the European Union if it or any other member of the EU has a public
debt-to-GDP ratio greater than 60%. Sec. 3 would direct the Secretary to instruct the USED at the
IMF to oppose any assistance directly or indirectly to an EU member if any other EU member
had a debt-to-GDP ratio above that level. The bills state in their heading that the provisions are
temporary, but no time limitation is provided.
Because of the size of its share, the United States can block activation of the expanded NAB
facility by withholding support, if and when the expanded NAB comes into effect. This
legislation would require the United States to oppose use of the NAB facility for any loans to
European countries that have substantial public debts. Some suggest, however, that the legislation
might also have unintended effects. For example, if this legislation had been in effect last year,
the United States would have had to oppose all IMF loans to post-communist countries of Central
23 Greece, Iceland, Italy, Jamaica, Japan, Lebanon, Singapore, Sudan and Zimbabwe, according to the Economist
Intelligence Unit.
Congressional Research Service
19
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
and Eastern Europe that are members of the EU, even though most analysts agree that excessive
levels of public indebtedness were not the source of their difficulties.
The bills seem to presume that the expanded NAB resources will be activated on a country-by-
country basis and therefore loans to European countries can be blocked while loans to other
countries may be approved. IMF member countries agreed in April 2010, however, that the
expanded NAB will be activated for a set period of time (up to 6 months) and would be used to
finance any applicable loans during that period. The United States has the power to prevent the
NAB from being activated but it cannot veto specific borrowers. Under this legislation, the
Secretary of the Treasury would need to keep the NAB shut indefinitely or risk the possibility that
an EU country might unexpectedly seek to borrow during a period when the NAB has been
activated.
This legislation might also prevent the existing bilateral lines of credit provided by some
countries from being folded into the expanded NAB, since this would be done by reimbursing
countries from the NAB for money the IMF had previously drawn from their bilateral credits.
Bilateral credits were used to help fund the recent loan to Greece. Thus, if this legislation were in
effect, the United States might have to oppose activation of the NAB for the purpose of
reimbursing bilateral creditors for their share in the Greek loan.
H.Con.Res. 279
On May 18, 2010, Representative McMorris Rodgers introduced House Concurrent Resolution
279 (H.Con.Res. 279), a measure that would disapprove U.S. participation in any IMF funding
package for the EU, unless each EU member country complies with the EU rules on deficit
spending and each had a public debt-to-GDP ratio at or below 60%. The legislation seeks to
discourage or prevent U.S. resources being used to help fund the European financial stability plan
announced on May 9, 2010.
This legislation provides Members of Congress with a means of expressing opposition to any use
of U.S. funds to help finance an IMF share in the proposed European stability plan. It currently
seems unlikely, however, that IMF resources will be used to support the European plan. The IMF
makes loans to individual countries and not to groups of countries, such as the EU. IMF officials
also have said that the IMF has not agreed to provide any money towards the European plan. A
concurrent resolution by one chamber of Congress does not have the force of law. In addition, a
country’s subscription to IMF quota resources is an irrevocable commitment, and legislation of
this sort would not prevent the IMF from drawing on the U.S. quota or from using NAB resources
to finance future IMF loans to European countries.
Congressional Research Service
20
Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis
Author Contact Information
Rebecca M. Nelson, Coordinator
Jonathan E. Sanford
Analyst in International Trade and Finance
Specialist in International Trade and Finance
rnelson@crs.loc.gov, 7-6819
jsanford@crs.loc.gov, 7-7682
Dick K. Nanto
Martin A. Weiss
Specialist in Industry and Trade
Specialist in International Trade and Finance
dnanto@crs.loc.gov, 7-7754
mweiss@crs.loc.gov, 7-5407
Acknowledgments
Amber Wilhelm, Graphics Specialist, provided assistance preparing the figures.
Congressional Research Service
21