Brussels, 27/02/2012 (Agence Europe) - The planet's principal economies asked the Europeans first of all to tighten up the financial firewall before thinking about increasing IMF resources to assist countries which are struggling, at this weekend's meeting of the G20 finance ministers in Mexico City. The European eurozone leaders are to hold talks this week on the possibility of combining the two bailout funds in order to bring total European intervention capacity to €750 billion, but the intransigence of Germany, the largest contributor country, means that a quick decision is by no means certain.
“There is broad consensus that the IMF cannot be a substitute for the absence of a reinforced European firewall and that the IMF cannot move forward without greater clarity regarding Europe's own projects”, said American Treasury Secretary Tim Geithner, reported by the daily newspaper les Échos. The British spoke along the same lines: “we are prepared to consider additional resources for the IMF, but only once we have seen the colour of the eurozone's money”, Chancellor of the Exchequer George Osborne told Sky. The situation was summed up by the governor of the Bank of Canada, Mark Carney: “there is a vicious circle here where each is waiting for the other to do the right thing”, he said, reported by the Wall Street Journal.
The IMF is planning to increases resources by €600 billion in order to come to the rescue of the most fragile countries (see EUROPE 10535). By means of bilateral loans, the eurozone has pledged €150 billion; other member states (Denmark, Poland, the Czech Republic and Sweden) having also announced their contributions (see EUROPE 10520). A final decision on increasing the resources of the IMF will be made at the spring meetings of the IMF and the World Bank in April in Washington. Taking the view that revising the resources of the IMF is “particularly important” in view of the downward risks to the global economy, the world's largest paymasters stress that the assessment as to whether the size of the financial firewall is adequate, which will be carried out by the Europeans “in March”, will constitute “an essential contribution” to the reflection on the mobilisation of additional resources for the IMF.
Standing alone against all the rest, Germany is in a race against time (see EUROPE 10560). The political agreement on the second bailout and signs of relaxation on financial markets due, amongst other things, to major amounts of cheap cash injected by the ECB, have in its view made a reinforcement of the European financial firebreak less urgent. This could reach a level of €750 billion if the remaining €250 billion of the European Financial Stability Fund and the €500 billion of the future European Stability Mechanism (ESM), which enters into force in July 2012, were combined. The month of March “goes from 1 March to 31 March” and it is during this period that we will decide whether the volume of the ESM is sufficient, was the evasive comment by the German finance minister, Wolfgang Schäuble. (MB/transl.fl)