MEXICO CITY — The G-20 nations are conditioning giving additional money for the International Monetary Fund on the European Union first increasing its financial stabilization funds to ease concerns about the eurozone debt crisis, officials said Sunday.
Officials participating in a meeting of G-20 nations’ finance ministers and central bank heads said an EU decision to add to the estimated $675 billion in firewall funds already committed to the effort would be essential before the rest of world considers contributing to the stabilization measures.
“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,” the meeting’s closing joint statement said.
Christine Lagarde, head of the IMF, said the expectation that the EU’s firewall fund will be increased was widespread among G-20 officials.
“They all expect that the euro area will strengthen, consolidate, reinforce its firewall to make sure that it is both adequate and credible before they look at increasing the firepower of the fund” the IMF, she said.
U.S. Treasury Secretary Timothy F. Geithner joined in the calls for the EU to do more.
“There is broad agreement that the IMF cannot substitute for the absence of a stronger European firewall and that the IMF cannot move forward without more clarity on Europe’s own plans,” he said, while noting the U.S. would not be making any increased contribution.
The weekend talks mainly focused on stability for the eurozone, where debt and economic problems, like the specter of a default by Greece, have threatened to destabilize global financial markets.
Though no specific amount in firewall funds was discussed, Mr. Geithner said the funds “have to be large … my sense is that [the Europeans] understand that.” Other officials said the added funds must be enough to calm market concerns and should be available to countries before they fully carry out promised fiscal reforms.
A senior G-20 official who spoke on the condition of anonymity said the consensus that the EU must act is broad, and include big potential lender countries like China and Japan. They feel the IMF can play a backup role, but the EU’s own fund must be the first line of defense, the official said.
The reluctance of Germany - Europe’s strongest economy and likely any stabilization fund’s biggest contributor - may be the sticking point. German officials did not speak to the media following the conference but appear reluctant to increase stabilization funds.
In a column in the Mexican newspaper El Universal on the eve of the meeting, German Finance Minister Wolfgang Schauble wrote that “should we increase even more the firewalls? The response is a resounding no.”
Mr. Schauble also rejected sharing other eurozone country debts or expanding the euro money supply to meet countries’ budget gaps.
“This would not only not solve the problems of debt and competitiveness that brought the affected countries to their current state of affairs, it would also discourage their governments from carrying out consolidation and reform,” he wrote.
Please read our comment policy before commenting.