Eurozone ministers agreed on Monday to boost IMF resources by 150 billion euros (US$195.6 billion) to ward off the debt crisis and won support for more money from EU allies, but it was unclear if the bloc would reach its 200 billion euro target after the UK bowed out.
Following a three-hour conference call, EU finance ministers said currency zone outsiders the Czech Republic, Denmark, Poland and Sweden would also grant loans to the IMF to help save the 17--nation zone.
However, the EU said those lenders must first win parliamentary approval, while the UK made it clear it would not participate in the plan.
That leaves the eurozone more reliant than ever on major economies such China and Russia, which have shown a willingness to lend more to the IMF. The US for its part is concerned about the lender’s exposure to the eurozone.
Ministers had set an informal deadline of Monday to arrive at the 200 billion figure, which was agreed by EU leaders at a summit on Dec. 8 and Dec. 9 and urged other nations to take part.
“Euro area member states will provide 150 billion euros of additional resources through bilateral loans to the fund’s general resources account,” the EU finance ministers said in a joint statement after their call.
“The EU would welcome G20 members and other financially strong IMF members to support the efforts to safeguard global financial stability by contributing to the increase in IMF resources,” the statement said.
British Treasury sources said the UK had decided not to contribute to an increase IMF resources.
“We were clear that we would not be making a contribution,” one Treasury source said, while another added that there was “no agreement on the 200 billion” euro funding boost.
However, the EU was more diplomatic, saying in its statement that London would take a decision on the issue early in the new year in the framework of the G20 economies.
The increase in IMF resources is seen as one pillar in a multi-pronged strategy to strengthen the eurozone’s fire-fighting capability and build better defenses for the future. Another pillar is making the eurozone’s existing bailout fund, the European Financial Stability Facility (EFSF), more flexible in how it tackles the debt debacle.
Speaking during testimony to the European Parliament, European Central Bank (ECB) President Mario Draghi praised EU efforts to forge a new “fiscal compact” as a solid base for responding to the crisis and called the euro an “irreversible” project.
“I have no doubt whatsoever about the strength of the euro, about its permanence, about its irreversibility,” he said. “You have a lot of people, especially outside the euro area, who really spend a lot of time in what I think is morbid speculation, namely, what happens if? And they all have catastrophic scenarios for the euro area.”
However, he said bond market pressure on the eurozone would be “very significant” in the first quarter, with about 230 billion euros of bank bonds, up to 300 billion in government bonds and more than 200 billion euros in collateralized debt all maturing.
“The pressure that bond markets will be experiencing is really very, very significant, if not unprecedented,” he said.
Draghi spoke while EU ministers were still on their conference call, with discussions also looking at issues surrounding the eurozone’s permanent bailout fund, with Finland unhappy about plans to weaken the unanimity rule governing how the European Stability Mechanism (ESM) is run.