May 31, 2012 / 6:11 PM / 5 years ago

IMF denies it in talks with Spain on funding help

International Monetary Fund (IMF) Managing Director Christine Lagarde addresses graduates at Harvard Kennedy School in Cambridge, Massachusetts, May 23, 2012. REUTERS/Dominick Reuter

WASHINGTON (Reuters) - The head of the International Monetary Fund said on Thursday the global lender had not received a request for financial support from Spain and described her meeting with Spain’s Deputy Prime Minister Soraya Saenz de Santamaria as “very productive”.

After the meeting with Saenz, IMF Managing Director Christine Lagarde denied a media report that the IMF was considering contingency plans for a Spanish bailout.

“There is no such plan. We have not received any request to that effect and we are not doing any work in relation to any financial support,” Lagarde said in a statement.

Saenz was also due to meet U.S. Treasury Secretary Timothy Geithner to outline Spain’s measures to tackle its crisis.

Earlier an IMF spokesman said an IMF mission would be in Spain on June 4 for regularly scheduled consultations with the Spanish authorities on the state of its economy.

The debt crisis has escalated in recent weeks at prospects that Greece could exit the euro zone, and worries over Spain’s shaky banks and increased government borrowing costs.

The European Commission on Wednesday offered direct aid for a euro zone rescue fund to recapitalized distressed Spanish banks and more time for Spain to reduce its budget deficit.

Concerns over Spain and Greece’s survival in the euro area pushed the euro to a two-year low against the dollar on Thursday.

A Dow Jones news report, quoting unnamed officials, said the IMF was in talks with Spain on contingency plans for a rescue loan. The report caused Wall Street stocks .SPX to sharply cut losses.

The IMF, reacting to the report, said it is always assessing different scenarios in all of its member countries and repeated that the global lender was not in talks with Spain on financial help.

“The fund’s job is to assess the economic situation, monitor developments, and discuss different scenarios in all of its member countries. That is part of the fund’s surveillance work,” an IMF spokeswoman said.

In Madrid, a source in the economy ministry said the Spanish government was not aware of the IMF’s contingency measures.

“The government is not aware and has not been notified of any step being taken from the IMF in relation with Spain,” the source said in an emailed comment.

The European Commission’s top economic official Ollie Rehn warned on Thursday the single currency area could disintegrate without a stronger crisis fighting mechanism.

The IMF’s Rice said the fund had long been talking up the need for strengthened crisis management tools and a clearer vision on the overall architecture of the euro zone.

“Stronger risk-sharing mechanisms would be desirable and financial integration would be bolstered by unified supervision, a single bank resolution authority and a single deposit insurance fund,” Rice added.

“Clearly the crisis in Europe continues to have an urgent aspect,” he said.

Reporting by Lesley Wroughton; Editing by James Dalgleish

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