EU ministers agree €150bn loan boost

Monday 19 December 2011 22.36
Michael Noonan said much progress was made
Michael Noonan said much progress was made

Eurozone ministers have agreed to boost IMF resources by €150bn to ward off the debt crisis and won support for more money from EU allies.

However, it is unclear if the bloc would reach its €200bn target after Britain bowed out.

Following a three-hour conference call, European Union finance ministers said currency zone outsiders the Czech Republic, Denmark, Poland and Sweden would also grant loans to the International Monetary Fund to help save the 17-nation eurozone.

But the EU said those lenders must first win parliamentary approval, while Britain made it clear it would not participate in the plan.

That leaves the eurozone more reliant than ever on major economies such China and on Russia, which has shown willingness to lend more to the IMF.

The United States for its part is concerned about the lender's exposure to the eurozone.

Ministers had set an informal deadline of today to arrive at the €200bn figure, which was agreed by EU leaders at a summit on 8-9 December and urged other nations to take part.

"Euro area member states will provide €150bn of additional resources through bilateral loans to the fund's general resources account," the EU finance ministers said in a joint statement after their call.

"The EU would welcome G20 members and other financially strong IMF members to support the efforts to safeguard global financial stability by contributing to the increase in IMF resources," they said.

British Treasury sources said Britain had decided not to contribute to an increase IMF resources.

"We were clear that we would not be making a contribution," one Treasury source said, while another added that there was "no agreement on the €200bn" funding boost.

The EU was more diplomatic, however, saying in its statement that Britain would take a decision on the issue early in the new year in the framework of the G20 economies.

The increase in IMF resources is seen as one pillar in a multi-pronged strategy to strengthen the euro zone'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.

Speaking after the talks, Minister for Finance Michael Noonan said much progress was made on aiding the IMF and on the European Stabilisation Mechanism.

Elsewhere, European Central Bank chief Mario Draghi said he was saddened by the spat between Britain and the rest of the EU over London's refusal to join the fiscal package to solve the bloc's debt crisis.

"Britain certainly has shown a capacity to undertake a fiscal correction of an extraordinary size," Mr Draghi said in an interview in today's Financial Times.

"My more general reaction to all this is that it's sad. I think the UK needs Europe and Europe needs the UK."

On 7 December, ratings agency Standard and Poor's placed major EU economies on watch for downgrades of their AAA credit ratings.

Fitch Ratings expressed doubt Friday that an envisaged European budget discipline pact would solve the debt crisis and warned it may soon downgrade six countries.