G20 leaders insist no more IMF cash unless eurozone boosts financial firewall

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A communique agreed by G20 finance ministers in Mexico City last night said a decision by eurozone leaders to boost their own firewall was "essential" before any more external resources were allocated via the International Monetary Fund (IMF). "Euro area countries will reassess the strength of their support facilities in March. This will provide an essential input in our ongoing consideration to mobilise resources to the IMF," the official said, quoting from the draft.

George Osborne, the Chancellor, said: "The rest of the world will only consider extra resources for the IMF once the eurozone themselves contribute more to supporting their own currency. We have to see the colour of the eurozone's money first – and, quite frankly, that hasn't happened. Until it does, there's no question of extra IMF money from Britain or probably anyone else."

G20 finance ministers did agree that any extra IMF funding would come via bi-lateral loans. Christine Lagarde, managing director of the IMF, added: "G20 countries must now strengthen resilience to further shocks that could result from still fragile financial systems, high public and private debt, and higher world oil prices."

The failure to reach an agreement on extra funds adds yet another delay in the tortuous process of trying to shore up the eurozone. It also dashes a timetable set out in Cannes in November when G20 leaders proposed boosting the IMF's war chest by as much as $600bn (£378bn). The leaders had hoped the deal would be approved by the G20 finance ministers this weekend.

http://www.telegraph.co.uk/finance/financialcrisis/9107437/G20-leaders-insist-no-more-IMF-cash-unless-eurozone-boosts-financial-firewall.html

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1. G-20 Snubs Germany on IMF Funding

Germany was left to dig deeper to combat the euro-area debt crisis after the Group of 20 nations told Europe to come up with more financial firepower before they consider lending outside support.

The decision by G-20 officials to rebuff European calls for assistance in their crisis-fighting effort pending an increase in its own financial backstop puts the onus on Germany, already the biggest national contributor to bailouts, to overcome its resistance to doing more.

With a parliamentary vote on a second Greek aid package looming in Berlin today, Chancellor Angela Merkel’s government must now decide whether to back plans at a March 1-2 European Union summit to combine rescue funds and produce a potential firewall of 750 billion euros ($1 trillion). Europe “doesn’t really need any outside money,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in an e-mail. “It needs their own policy makers, especially Germany, to show leadership.”

Germany went in to the Mexico meetings of finance ministers and central bankers urging G-20 nations to find fresh money for the International Monetary Fund that could be channeled to defuse the euro-region crisis now in its third year. IMF chief Christine Lagarde, who attended the talks, said she wants to raise the Washington-based fund’s lending capacity by $500 billion to fend off “further shocks” to the global economy.
http://www.bloomberg.com/news/2012-02-26/geithner-schaeuble-spar-over-sovereign-debt-crisis.html