THE EURO zone’s crisis-fighting measures faced another setback after Germany’s Bundesbank expressed reservations about using fresh payments to the International Monetary Fund (IMF) to fund struggling EU countries.
Providing an additional €200 billion in resources to the IMF was one of the measures agreed by euro zone leaders meeting in Brussels last Friday.
However, Germany’s central bank has made its own €45 billion contribution, conditional on the credit not being reserved exclusively for euro zone countries.
ECB president Mario Draghi backed this view last week saying that funding countries in such a way, although not explicitly outlawed, breached the spirit of its mandate not to finance national governments.
Bundesbank president Jens Weidmann said the Frankfurt bank was prepared to make its contribution, but only if other non-euro zone countries did the same.
“It is assumed that other EU countries will contribute to the financing according to their IMF quota,” said Mr Weidmann in a leaked letter from last Friday to finance minister Wolfgang Schäuble.
“In addition, the Bundesbank assumes that other non-EU countries will make a considerable contribution to stocking up the IMF’s resources.”
Last week, US treasury secretary Timothy Geithner dismissed as “not accurate” reports that Washington would make additional IMF payments, as envisaged by euro zone countries.
While the Bundesbank waits for reaction from Beijing and other non-EU capitals, it is holding out for a green light from the Bundestag on the additional payments.
However, German MPs declined to come out for or against the additional payments yesterday, saying they do not want to influence the Bundesbank.
Some members of chancellor Angela Merkel’s Christian Democratic Union (CDU) have suggested such payments do not require parliamentary approval. Others have suggested backing is required but that this should not be seen as a political demand on the Frankfurt central bank.
“As parliamentarians we will not say what the Bundesbank should or shouldn’t do,” said Peter Altmaier, CDU floor leader. “However, we will make clear that we support the Brussels summit results in all its parts.”
Dr Merkel will outline the results of the Friday summit today in the Berlin parliament.
Additional Bundesbank conditions to the IMF funding boost could bode ill for the euro zone bailout funds.
With continued pressure on Italy and Spain, the EU has just six months to find additional sources of capital for the current European Financial Stability Facility bailout fund and its permanent replacement, the European Stability Mechanism, due to come on stream in mid-2012.
