EU may lend up to $100bn to IMF - report
The European Union may lend $75-100 billion to the IMF to boost its lending capacity, under a draft agreement produced today, but the union stuck to its rejection of US calls to spend more on cushioning the global downturn.
Leaders of France and Germany shunned the US demands, telling a news conference in Berlin that the focus of upcoming G20 talks should be on agreeing to tighter regulations.
"We consider that in Europe we have already invested a lot for the recovery, and that the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself," French president Nicolas Sarkozy said.
Spelling out the EU position for the G20 summit of industrialised and developing countries on April 2nd in London, a draft agreement of EU leaders backed a doubling of International Monetary Fund resources to $500 billion.
The draft, obtained by Reuters news agency, is to be approved by an EU summit on March 19-20. It said the EU leaders should:
"Agree that the EU member states are ready to provide a fast, temporary support of IMF lending capacity in a form of a loan in the total amount of $75-100 billion."
The substance of the text - put forward by the Czech EU presidency - has not been agreed and could still be changed ahead of the March 19-20 EU meeting in Brussels.
The IMF welcomed offers of aid to help members ride out a global recession, but declined to comment on the Reuters report.
The April 2nd G20 summit will be prepared by a meeting of finance ministers and central bankers from the grouping on Friday and Saturday near London.
If agreed, the loan could bring the IMF close to covering its needs. It has been promised $100 billion from Japan and is looking for at least another $150 billion to help the growing number of countries hit by the global downturn.
US treasury secretary Timothy Geithner has called for an even bigger expansion of IMF funds, by as much as $500 billion.
The draft EU summit conclusions said IMF governance should change to reflect the relative weight of various economies - a reference many will interpret as seeking to give more say to China, which the EU wants to contribute more cash to the IMF.
It showed EU leaders would also call for an end to the tradition of picking a European for IMF head and an American to run the World Bank - a discussion already started when current IMF chief Dominique Strauss-Kahn was appointed in 2007.
Mr Geithner said on Wednesday he wanted the G20 to put in place a "substantial, sustained commitment to stimulus" to help lay the foundations of a global economic recovery. His British counterpart Alistair Darling sounded the same line, saying the two saw "eye-to-eye" on spending policy.
The draft EU conclusions showed that rather than calling for more spending, the EU would push at the G20 for regulation of all financial markets, products and participants without exception and regardless of their country of domicile, especially hedge funds.
They will also seek support for their plans to regulate and supervise rating agencies, agree on guidelines on executive pay to discourage excessive risk-taking, draw up a list of tax havens and develop a toolbox of sanctions against them.
"I am very optimistic about that," German Chancellor Angela Merkel said after the meeting with Mr Sarkozy, referring to G20 cooperation on tax havens.