Eurozone-IMF Rescue Operation In Doubt


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EU leaders decided last week to boost the International Monetary Fund’s firepower with an additional €200 billion, but poorer East European countries are wrangling over their contributions. The EurActiv network contributed to this article.

Germany said it had secured its €45 billion share, but made it clear that it would transfer the amount to the IMF only if countries outside the eurozone join the operation and if the Bundestag approves the operation.

“If the conditions are not met, then we cannot agree with this line of credit,” German central bank chief Jens Weidmann reportedly said, insisting that the burden is shared “fairly” among eurozone member countries.

Germany is Europe’s biggest provider to the IMF eurozone fund. The additional money for the IMF would in turn be available to help stabilise troubled eurozone countries.

The burden sharing is far from clear. Asked to explain what the distribution key was, Amadeu Altafaj, spokesperson for Economic and Monetary Affairs Commissioner Olli Rehn, declined to provide a clear answer.

During the 8-9 December summit, IMF chief Christine Lagarde confirmed that a commitment to boost the fund by €200 billion had been struck via bilateral loans. However, the details still need to be confirmed by the EU and the IMF “within 10 days”, she said.

EU leaders presented the summit’s decision to boost their IMF funding as a token to convince emerging economic powers – like China – to also contribute to the fund.

During the EU-Russia summit yesterday (15 December), officials close to Russian President Dmitry Medvedev said that Russia could lend at least €7.5 billion ($10 billion) to help indebted eurozone countries via the IMF.

Rumours spread panic

Various figures about national contributions circulated in less-affluent EU members, causing panic in national parliaments.

The eurosceptic Czech President Václav Klaus said the country shouldn’t contribute. Czech Prime Minister Petr Nečas said he opposed the €3.5 billion contribution his country had been asked for, calling for more analysis before his government reaches a decision.

In Slovakia, Jozef Kollár – a leader of the centre-right Freedom and Solidarity in the government – said he had an “overall negative” opinion of the plan. He called it a “weird transaction” pushed through by German and French leaders to get more money for an EU rescue fund without going through their parliaments, the Associated Press news agency reported.

Poland, which holds the rotating EU presidency, is expected to decide within the next few days how much of its central bank reserves it will contribute to the IMF. Deputy Finance Minister Ludwik Kotecki was quoted as saying that the National Bank of Poland had €74.3 billion in reserve assets in November.

Kotecki said that eurozone member states are tentatively expected to contribute about three-quarters of the €200 billion, while the rest would come from the non-euro-zone EU members that signed up for the deal, Dow Jones reported.

Hungary reportedly won’t contribute because it is still repaying the IMF for past bailouts. Hungary was the first EU country to benefit in 2008 from a European facility worth up to €12 billion to address the financial turmoil. Budapest recently requested ‘precautionary aid’ from the EU and the IMF, as a safety net against possible future financing difficulties.

Romanian President Traian Basescu attended a government session on Wednesday, explaining that out of the €200 billion, non-eurozone countries were expected to provide €50 billion. Like Hungary, Romania is benefiting from an EU-IMF bailout.

He said that his country could not commit any funds from the budget, but could move temporarily from the reserve €2 billion to the IMF as a loan, which would be repaid.

In Bulgaria, the EU’s poorest member, Foreign Minister Nickolay Mladenov was quoted as saying that the country needed to receive “a lot of information” before any decisions are taken.

Ivan Kostov, leader of DSB, a small opposition centre-right party, said that according to his own calculations, Bulgaria’s share amounted to €3.5 billion, a gigantic sum for the impoverished country.

Kostov blasted Prime Minister Boyko Borissov for refusing to inform the Parliament about what was agreed at the summit.

“Cameron came back to Britain and immediately faced Parliament. Madame Merkel also faced the Bundestag immediately,” Kostov said, referring to the post-summit debates held by British Prime Minister David Cameron and German Chancellor Angela Merkel.

Original article


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