The head of the International Monetary Fund said that the EU can use its bailout funds to directly inject capital into Spanish and other ailing euro-zone banks under new policies outlined by leaders last week.
There is still disagreement within the euro zone over the ability to use the European Union's emergency funds for direct recapitalization of Spanish banks, which the IMF wants so as to avoid adding to the country's debt burden.
But IMF Managing Director Christine Lagarde weighed into the debate at a press conference Tuesday to say that plans for a new EU banking union "would allow, for instance, the direct participation of the European Stability Mechanism into the capital of Spanish banks."
"It's what the ESM should be doing with its money," Ms. Lagarde later said in an television interview on CNBC.
Separately, she also said in the interview that the European Central Bank should focus its efforts on its bond-buying program to help ease the debt crisis tensions in the euro zone, rather than lowering interest rates.
The IMF has said repeatedly that the ECB has more room to lower key policy rates.
"But we're not sure that this is the best channel at the moment," because of the differing needs of euro members, the IMF chief said.
"On the other hand, the asset purchase program is much more selective and could be used in a more judicious way," Ms. Lagarde said.
Asked if the IMF is open to rewriting the bailout deal with Greece's new government, the fund boss said, "I'm not in the negotiation or renegotiation mood at all."
Rather, as the IMF team begins its long-delayed assessment of the state of the joint EU/IMF bailout program within the next 48 hours, Ms. Lagarde said the fund is currently only in a "fact-finding mood."
Source: Dow Jones