By Nick Mann | 27 February 2012
Finance ministers from the world’s leading economies will wait until the eurozone countries commit more money to protect the single currency before agreeing to bolster the International Monetary Fund’s lending capacity.
After meeting in Mexico, the Group of 20 finance ministers and central bank governors said: ‘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.’
According to IMF director general Christine Lagarde, increasing the fund’s lending capacity by $500bn would help to build ‘stronger global firewalls’ to ‘guard against renewed shocks and to restore global confidence’.
She stressed, however, that any increase in IMF lending capacity would have to be combined with an ‘equally credible, high-quality and properly sized firewall at the European level’ before a ‘concrete’ decision could be made.
In particular, eurozone leaders are under pressure to agree to combine the temporary bailout fund set up specifically to address the sovereign debt crisis – the European financial stability facility – with the permanent European stability mechanism.
This would establish a bailout fund worth up to a reported $1trn. Any additional funding then agreed by the G20 countries would add to the $358bn the IMF has already committed to address the eurozone crisis.
Leaders from the European Union’s member states meet in Brussels on March 1 and 2, but agreement on combining the two eurozone bailout funds is not expected until later in the month.
