Eurozone to pursue IMF lending plan
European finance ministers will pursue plans on Monday to enhance the IMF’s arsenal and press on with a drive for tighter fiscal rules in an attempt to assuage doubts they can overcome their sovereign debt crisis.
The EU ministers will discuss via a teleconference the draft text of a new eurozone «fiscal compact» so that it can be finalized by the end of January, EU officials said.
Having agreed to offer 150 billion euros to the International Monetary Fund to raise its crisis-fighting capacity, they will also consider the size of individual bilateral loans to the Fund in talks from 4.30 p.m.
There are doubts about this scheme. Germany’s Bundesbank said last week it would only contribute if non-euro zone and non-European countries did too and the level of outside commitment is not clear.
German Finance Minister Wolfgang Schaeuble saw little chance of the United States increasing its contribution to the Fund to help Europe.
“Washington cannot make bilateral loans available to the IMF without Congress approving it … and there’s no chance of that and the American government has always made that clear,» he told German radio.
Even with the year-end looming there is no let-up in the scramble to ease market pressure on euro zone strugglers.
The European Central Bank will offer three-year funds to banks for the first time on Wednesday to counter a freeze in interbank lending.
France hopes banks will use the money to buy euro zone bonds but Italy’s Unicredit said last week this «wouldn’t be logical» for banks under pressure to reduce risk and rebuild capital.
Despite new governments in Greece, Italy and Spain redoubling austerity efforts, market response to measures agreed at a December 9 EU summit has been cool, mainly because of the reluctance of the ECB to step up euro zone bond purchases and declare its readiness to do so.
As a result, ratings agency Fitch concluded on Friday that a ‘comprehensive solution’ to the crisis was technically and politically beyond reach. It warned that six euro zone economies including Italy and Spain could be hit with credit downgrades in the near future.
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