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Behind the many headlines surrounding Greece on Friday was confirmation that the IMF would be paying less into this second aid package for Greece than was the case for the first one back in May 2010. On Friday, it announced a further EUR 28bln contribution, although EUR 10bln of this belongs to the first aid program, so the contribution will actually be 14% of the EUR 130bln total of the second bailout package.

Whilst not that surprising, it is nevertheless a further illustration that the IMF and international community (principally G20) are gaining the upper hand in their desire to see the EU play a greater role in further and subsequent bailouts, should they be required. But this shift has come more from the international community stepping back rather than the EU and its respective institutions stepping forward to shoulder the burden. The reasons for this reluctance on behalf of the EU to put its shoulder to the wheel are well known, such as the no bail-out clause of the founding treaty of the single currency, together with the political implications and costs of doing so. These underline Germany’s ongoing reluctance to sanction an increase in the permanent rescue facility, due to become operational by the middle of this year.

As EU leaders gather once again today to discuss the issue (no decision is likely until later in the month), the biggest risk is that, once again, they fall into the trap of complacency. Italian yields have spent most of this month below the 5% level (10yr), which has at least removed some of the immediate pressure on EU leaders. But rather than take this as an opportunity to praise their efforts, it’s exactly the time to be bolstering national defences. It’s very unlikely that Portugal will escape having to ask for further assistance and Greece is also far from being out of the woods, so there remains a clear risk of a period of further strain on peripheral debt. This is the EU’s opportunity to be ahead of the pack for once, and one that Germany should seize upon.