US shoots down plan to increase IMF aid for eurozone debt crisis
Published 15/10/2011 | 05:00
EUROZONE leaders have been told to "put their own house in order" at a global summit.
The call was made at a meeting of finance ministers from the G20 group of the world's biggest economies in Paris.
Finance ministers and central bankers from the G20 countries gathered yesterday for a weekend-long discussion on saving the world economy from the threat posed by the European debt crisis.
Yesterday, a proposal to double the size of the International Monetary Fund (IMF) to help the European rescue was blocked by key donor countries, including the US and Australia.
"The priority here is for Europeans to put their own house in order," Australian Finance Minister Wayne Swan said.
Less-developed countries, including Brazil, had backed the proposal. They wanted to increase the firepower available to contain the European crisis and so stop the effects spilling into the wider world economy.
However, key figures, including US Treasury Secretary Timothy Geithner, blocked that plan. The US is the biggest funder of the IMF.
The US wants Europeans themselves to act more decisively and says resources are already available.
Canada's Jim Flaherty also said the G20 should keep up pressure on the eurozone on its "arduous" journey toward a solution, rather than focusing on the IMF's resources.
Eurozone members with a seat at the G20 are Germany, France and Italy. The pressure on them to come up with an internal solution, without further outside aid, mounted on the first day of talks yesterday.
The French and German delegates at the talks repeated their commitment to have a plan for ending the crisis ready when G20 heads of government meet on November 3 and 4 in the French resort of Cannes.
Political leaders in Europe agreed a number of measures to tackle the crisis at a summit held on July 21. They included increasing the size of the main European bailout fund to €440bn and making the fund more flexible.
Yesterday, European Commission President Barroso said the European Financial Stability Fund (EFSF) now had the power to buy sovereign bonds on the secondary and primary markets. It can offer credit lines to governments and fund bank rescues.
Until now, the EFSF has only been able to raise cash in the markets and lend it on to bailout countries.
The agreed changes were approved by the last of the 17 euro countries on Thursday.
In a sign of the erosion of economic confidence, the €440bn fund is no longer seen as nearly adequate to the task of shoring up the European economy or restoring confidence. (Additional reporting, Reuters)