EU FINANCE ministers last night resolved to boost the resources of the International Monetary Fund by some €170 billion, but Britain’s refusal to provide an anticipated €30 billion left the deal well short of the €200 billion target set by European leaders.
The arrangement is designed to provide additional firepower for the IMF to fight the debt crisis in the euro zone and it marked the second time in 10 days that London stepped aside from a European agreement to tackle the emergency.
“These resources will enhance the IMF’s capacity to fulfil its systemic responsibilities in support of its global membership, which is especially important given the ongoing economic slowdown and financial market tensions,” the finance ministers said in a statement.
As a recipient of an EU-IMF bailout, Ireland will not be contributing any additional support to the IMF. Minister for Finance Michael Noonan said the meeting had been successful, with significant progress made. The new funding comprises €150 billion in bilateral loans from euro zone countries, with the biggest loans coming from Germany (€41.50 billion) and France (€31.40 billion).
The deal also anticipates large contributions from Italy (€23.48 billion) and Spain (€14.86 billion), countries whose rising borrowing costs may lead to a requirement for external aid. Four non-euro countries – the Czech Republic, Denmark, Poland and Sweden – will provide about €20 billion, but there will be no immediate contribution from Britain.
“The UK could not accept a contribution under EU framework and will define its contribution in the G20 context,” said a European source, who was briefed on a four-hour teleconference of finance ministers.
The stance set out by chancellor George Osborne comes soon after prime minister David Cameron blocked a summit deal to change the EU treaties when he failed to extract concessions for the City of London financial market.
This has prompted anxiety about the creation of a “two-tier” Europe.
Such a development is viewed with some concern in Dublin given Britain’s status as Ireland’s biggest trading partner and nearest neighbour.
Mr Cameron’s stance at the summit led the 26 other EU leaders to seek agreement on an intergovernmental treaty operating outside the ambit of European law, complicating the effort to strengthen Europe’s budget rules.
At that same summit, EU leaders resolved to boost the IMF’s resources by €200 billion in the hope that other global powers would follow suit with increased contributions. “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 so as to fill global financing gaps,” the ministers said.
The talks came as European Central Bank chief Mario Draghi rejected “morbid” talk about a possible break-up of the single currency. Any such development would carry extraordinary cost, he told MEPs in Brussels.
“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,” he said.
“I have no doubt whatsoever about the strength of the euro, about its permanence, about its irreversibility.” Separately, officials begin talks today on the international treaty which is to give effect to the summit deal.
Dublin is silent as to whether the arrangements set out in the draft treaty text prepared for European Council president Herman Van Rompuy might lead to a referendum.
The draft suggests the agreement will come into force when ratified by nine of the 17 euro zone countries, raising questions about the feasibility of simultaneous application of two different sets of rules.
The draft also suggests the application of the new treaty rules would be reviewed by national courts, something which raises the prospect of judicial oversight of budget policy.
