The eurozone must put in place a bigger firewall to combat its debt crisis before other countries will help by giving more cash to the IMF, the G20 top and developing economies said on Sunday.
A statement released after a meeting of the group of 20 finance ministers and central bankers in Mexico City 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 mobilize resources to the IMF,” they said.
Calls on the eurozone to boost their crisis-fighting war chest dominated the meeting here in Mexico City, with top officials such as US Treasury Secretary Timothy Geithner saying it was essential to prevent more fallout worldwide.
“This is going to be a very difficult process of many, many years in Europe,” he warned after the meeting.
At a crunch two-day summit in Brussels starting on Thursday, EU leaders will debate whether to combine their current firewall, the European Financial Stability Facility (EFSF), with a permanent pot due to come into effect in July.
This would give the debt-wracked 17-nation zone a total fund of some 750 billion euros (US$1 trillion).
Europe’s top economic official, Olli Rehn, said he was confident leaders would decide on a reinforced firewall “during the course of March,” downplaying the chances of success of the summit.
To add even more firepower, the eurozone has called on countries outside the bloc to bolster the IMF’s resources.
IMF Managing Director Christine Lagarde has said the fund needs an additionalUS$500 billion, although she said she was “not obsessed” by this figure.
“We have to be flexible,” she told reporters.
“Progress on this strategy will be reviewed at the next ministerial meeting in April,” the G20 statement said.
The central bank governor of Mexico, which hosted the meeting as the current leader of the G20, said work would continue behind the scenes to come to an exact amount.
“The issue of amounts was not discussed today, but it will be an essential theme and will be worked on from now until the spring meetings of April,” Agustin Carstens told reporters.
Eurozone countries themselves have already promised 150 billion euros to the IMF in the hope of reassuring the markets they have the resources to tackle a re-emergence of the crisis.
However, countries outside the zone, including the US, Britain, Japan and China insisted at the G20 meeting that the eurozone first puts its hand in its pocket.
“We are prepared to consider IMF resources but only once we see the color of the eurozone money and we have not seen the color of the eurozone money,” British Chancellor of the Exchequer George Osborne told Sky News.
However, the major sticking point to an increase in the eurozone firewall remained Germany — the bloc’s top economy and political powerhouse.
German Finance Minister Wolfgang Schaeuble made no bones of Berlin’s opposition to pouring in more cash to the pot, saying it “didn’t make any economic sense.”
Nevertheless, he also said that a decision next month would be “timely” given the IMF discussion on more resources a month later.
A senior G20 official said that Europe was carefully managing the sequence of steps needed to put in place all the building blocks for a total deal — bigger eurozone fund plus more IMF funds — that would finally douse the crisis.