EU leaders were set to back a doubling of the IMF’s resources to US$500 billion at summit talks yesterday, and were ready to pay up to a third of the increase to help the fund handle and prevent crises.
The expected move by the 27 leaders came ahead of a key meeting of the G20 in London on April 2, which is meant to tackle the worsening global downturn.
Czech Finance Minister Miroslav Kalousek said on Thursday’s EU summit talks agreed that “a considerable increase” was needed to bolster the IMF’s role.
Dutch and Danish officials said the EU was ready to provide 75 billion euros (US$102 billion) of the additional 250 billion euros in IMF capital.
The EU leaders were also to call for the IMF to have more powers and cash, to allow it to watch out for new economic crises.
The EU argued that the IMF, created during the closing days of World War II, needed a greater role in surveillance and in providing more funds it could offer in emergency loans to countries in financial trouble.
Yesterday’s discussions among the EU leaders were to prepare the bloc’s position heading into the talks among the G20 group of leading industrialized and emerging countries.
The G20 talks are set to discuss global efforts in jump-starting economic growth.
EU leaders refused on Thursday to sign up to spend more cash to get out of a worsening recession, rebuffing calls by the US and European trade unions for more aid to bolster jobs.
The European Commission said that the bloc was spending 3.3 percent of GDP this year and next year on stimulus efforts — but most of this was extra welfare payments.
Government programs to boost the economy totaled 1.2 percent of GDP.
The US Federal Reserve said on Wednesday it would launch a US$1.2 trillion effort to lower rates on mortgages and other consumer debt.
Czech Prime Minister Mirek Topolanek, whose country holds the rotating EU presidency, said more deficit spending would be “a deadly idea.” He said EU nations needed to know whether a 200 billion euro EU-wide spending package was working before digging into depleted state coffers for more.
European leaders said that package would be matched by automatic spending on rising unemployment benefits and social programs to help those hit hardest by the downturn.
“The European Union has a much stronger social safety net. The United States has a much bigger problem in public finances,” Dutch Prime Minister Jan Peter Balkenende said.
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