European finance ministers fell short yesterday (19 December) of a target to boost IMF resources by €200 billion to ward off the debt crisis, after Britain said it would not take part in a plan aimed specifically at helping the eurozone.
In a three-hour conference call, ministers also assessed plans for tighter eurozone fiscal rules – a new ‘fiscal compact’ – that policymakers hope will insulate the 17-country currency zone against a repeat of the two-year debt crisis.
Ministers had set an informal deadline of Monday to arrive at the €200 billion figure, which was agreed by EU leaders at a summit on 8-9 December.
“Ministers confirmed yesterday that, as part of a broader international effort to improve the adequacy of IMF resources, euro area member states will provide €150 billion of additional resources through bilateral loans to the Fund’s General Resources Account,” Eurogroup President Jean-Claude Juncker said afterwards.
He said burden-sharing among euro area member states would be based on quota shares resulting from the 2010 quota reform.
Other non-eurozone countries willing to chip in
The Czech Republic, Denmark, Poland and Sweden indicated their willingness to take part in the process of reinforcing the International Monetary Fund’s resources, with the United Kingdom indicating only that it will define its contribution early in the new year in the framework of the G20.
For some member states, commitments will be subject to parliamentary approval, Juncker said.
The increase in IMF resources is seen as one pillar in a multipronged strategy to strengthen the eurozone’s fire-fighting capability and build better defences for the future. Another pillar is making the eurozone’s existing bailout fund, the EFSF, more flexible in how it tackles the debt debacle.
Stability Mechanism also under consideration
EU finance ministers also discussed issues surrounding the eurozone’s permanent bailout fund, with Finland unhappy about plans to weaken the unanimity rule governing how the European Stability Mechanism is run.
Finland’s opposition, if not overcome, could scupper efforts to bring the ESM into force in July 2012, a year earlier than planned, to step up crisis-fighting efforts.
But the primary focus of debate was about the increase in IMF resources, with concerns growing that the EFSF is insufficient to handle the debt problems and it is too long to wait until the permanent mechanism is up and running.
While EU leaders agreed at their last summit on the desire to boost IMF resources, there are doubts about whether the scheme will work, with not just Britain unenthusiastic, but also the United States and Germany’s Bundesbank.
Speaking to the European Parliament whilst the finance ministers were on their conference call yesterday, European Central Bank President Mario Draghi praised EU efforts to forge a new ‘fiscal compact’ as a solid base for responding to the crisis, and called the euro an “irreversible” project.