IMF Seeks to Limit Greece Exposure

By MATTHEW DALTON

BRUSSELS—The International Monetary Fund, concerned about its enormous long-term exposure to the euro zone, is likely to contribute a smaller share of official financing in the new Greek aid package than it did for the Portuguese and Irish rescue programs, according to people familiar with the situation.
The IMF has pledged to lend €78.5 billion ($113.91 billion) to Greece, Ireland and Portugal through 2014. That amount is many times the IMF shareholding of these three countries, a growing source of worry to fund officials.
Following the first Greek aid package in May 2010, the fund said it would contribute one euro for every two pledged by the euro zone for rescue loans to other euro-zone countries that might need them. Euro-zone officials assumed in negotiations over the new Greek aid package that the IMF would again contribute a third of the financing.
But the IMF has indicated that it is unlikely to follow that formula in the new aid package, these people said. "It certainly won't be one-third," one of them said.
Greece's debt sustainability is still a particular concern to fund officials despite the new aid package, which will provide nearly €160 billion in new financing for Greece over the next three years. Euro-zone leaders and the IMF at a summit last week agreed to lend Greece another €109 billion through to mid-2014. That is on top of the €110 billion the euro zone and the IMF agreed to lend the country in May 2010.
The IMF contributed just 27%—or €30 billion—of the financing in the first Greek aid package. But it pledged to provide one-third of official financing to future euro-zone bailouts.
The IMF adhered to that formula in the rescue loans for Ireland and Portugal. But the IMF's commitment to Greece is now 27 times Greece's shareholding in the IMF, and it will rise significantly with the IMF's contribution to the new aid program, which is still to be determined.
The IMF's commitment to Ireland is nearly 18 times the country's IMF shareholding, and the commitment to Portugal is 25 times its shareholding.
Write to Matthew Dalton at Matthew.Dalton@dowjones.com