Cookie consent

We use cookies to improve your experience on this website. By continuing to browse our site you agree to our use of cookies. Tell me more | Cookie preferences

EU calls for IMF to boost its war chest

The flags of the countries which make up the European Union, outside the European Parliament in Strasbourg, France.

Story highlights

  • Eurozone leaders want IMF to build up its own global firewall against contagion
  • Leaders increased the eurozone fiscal rescue fund on Friday
  • French finance minister: "Europe has done its part"

European leaders said they believed the €200bn increase in their fiscal rescue fund agreed on Friday would be enough to persuade non-eurozone countries that Europeans had "done our homework" and lead them to supplement eurozone efforts by building their own global firewall against contagion.

François Baroin, the French finance minister, said after two days of meetings here with his European counterparts that "Europe has done its part", suggesting it was now up to other large global economies to contribute to an enlarged International Monetary Fund war chest.

Wolfgang Schäuble, the German finance minister, said he wanted to put an end to speculation that the fund would be increased any further, adding that the eurozone has "now given our contribution" and had lived up to its "global responsibility."

"There is no sum with which you can convince financial markets," Mr Schäuble said, referring to the size of the eurozone firewall. "You can only be convincing with structural measures,"

Christine Lagarde, the IMF chief, has sought an additional $500bn for the IMF as a back-up to the eurozone's two rescue funds, which now have a combined ceiling of €700bn. But US and IMF leaders have cautioned that their support for such an increase was contingent on a significant increase in the eurozone funds.

Although the US has said it would not contribute to the new IMF firewall, its support is crucial as the largest IMF shareholder.

US and IMF officials welcomed the eurozone decision, but were cautious about predicting whether it would lead to a commensurate effort by Group of 20 leading economies when they gather in Washington next month for the IMF's spring meetings.

"Today's announcement by the eurogroup reinforces a trajectory of positive efforts to strengthen confidence in the euro area," said US Treasury spokeswoman Natalie Wyeth. "Over the last several months, European leaders have made significant progress in addressing the crisis."

The decision taken on Friday was the least ambitious of three options laid out by the European Commission, which included alternatives to raise the ceiling to as much as €940bn. European Union officials have warned such a minimalist approach may fail to "unlock" funding from non-European G20 countries.

In a statement, Ms Lagarde said the increase to €700bn will "support the IMF's efforts to increase its available resources for the benefit of all our members," and eurozone leaders said they believed the move was enough to get non-eurozone support.

"I think now the Europeans can travel to the spring meeting of the [World] Bank and the fund in Washington having done our homework on European firewalls and this can then be complimented by the global firewalls of the IMF resources," said Jörg Asmussen, a member of the executive board of the European Central Bank.

Olli Rehn, the European Commission's top economic official, noted that eurozone countries had already committed to lending €150bn to the IMF firewall. Although he had advocated a bigger increase, Mr Rehn said he was "satisfied" with the decision and said it should enable G20 countries, including some of the rapidly-developing Bric economies, to participate in the IMF fundraising.

"I trust that today's decision will pave the way for an increase of the IMF resources by the IMF spring meetings next month, in mid-April," he said.

      Europe's financial crisis

    • German Chancellor Angela Merkel talks with Finance Minister Wolfgang Schaeuble during a session at the Bundestag (lower house of parliament) on June 25, 2013 in Berlin.

      German Finance Minister Wolfgang Schaeuble says the eurozone's problems are not solved, but "we are in a much better shape than we used to be some years ago."
    • IBIZA, SPAIN - AUGUST 21:  A man dives into the sea in Cala Salada beach on August 21, 2013 in Ibiza, Spain. The small island of Ibiza lies within the Balearics islands, off the coast of Spain. For many years Ibiza has had a reputation as a party destination. Each year thousands of young people gather to enjoy not only the hot weather and the beaches but also the array of clubs with international DJ's playing to vast audiences. Ibiza has also gained a reputation for drugs and concerns are now growing that the taking and trafficking of drugs is spiralling out of control.  (Photo by David Ramos/Getty Images)

      Summer could not have come soon enough for Lloret de Mar, a tourist resort north of Barcelona. Despite the country's troubles, it's partying.
    • The Euro logo is seen in front of the European Central bank ECB prior to the press conference following the meeting of the Governing Council in Frankfurt/Main, Germany, on April 4, 2013.

      The global recovery has two speeds: That of the stimulus-fed U.S. and that of the austerity-starved eurozone, according to a new report.
    • The flags of the countries which make up the European Union, outside the European Parliament in Strasbourg, France.

      The "rich man's club" of Europe faces economic decay as it struggles to absorb Europe's "poor people", according to economic experts.
    • Packed beaches and Brit pubs? Not necessarily. Here's what drew travelers to one of Spain's most beautiful regions in the first place

      Spain's economic crisis is in its sixth straight year yet tourism, worth 11% of GDP, is holding its own, one of the few bright spots on a bleak horizon.
    • Photographer TTeixeira captured these images from a May Day protest in Porto, Portugal, Wednesday by demonstrators angered by economic austerity measures. "People protested with great order, but showed discontent against the government who they blame for this economic crisis," she said. "They want the government to resign and the Troika [European Commission, International Monetary Fund and European Central Bank] out of this country."

      As European financial markets close for the spring celebration of May Day, protesters across Europe and beyond have taken to the streets to demonstrate.
    • Croatian Prime Minister Zoran Milanovic delivers a speech in Mostar, on April 9, 2013. Prime Ministers from Bosnia's neighboring countries arrived in Bosnia with their delegations to attend the opening ceremony of "Mostar 2013 Trade Fair".

      As Croatia prepares to enter the 27-nation European Union, the country's Prime Minister says Italy must return to being the "powerhouse of Europe."
    • Anti-eviction activists and members of the Platform for Mortgage Victims (PAH) take part in a protest against the government's eviction laws in front of the Popular Party (PP) headquarters in Mallorca on April 23, 2013.

      Spain's unemployment rate rose to a record high of 27.2% in the first quarter of 2013, the Spanish National Institute of Statistics said Thursday.
    • People protest against the Spanish laws on house evictions outside the Spanish parliament on February 12, 2013 in Madrid, Spain.

      Spain has seen hundreds of protests since the "Indignados" movement erupted in 2011, marches and sit-ins are now common sights in the capital.