The meetings of the G20 and the International Monetary Fund that get under way today resemble nothing so much as a Children in Need telethon. Already, prime ministers and finance ministers have been phoning in with their pledges, and more are expected. The flashing totaliser is creeping up, and our host, IMF president Christine Lagarde, is geeing us all on to expect $400bn (£250bn), no less. The problem will be getting those generous donors to actually sign the cheques.
The aim is to build a sufficiently huge pile of resources at the IMF to allow it to help fund bailouts of Spain, Italy or perhaps even France, in the terrifying event that they become necessary. The IMF has already partnered with the eurozone nations themselves to fund the bailouts of Ireland, Greece and Portugal. Now an even bigger firewall is needed to ensure that sovereign debt investors keep calm and carry on lending to the indebted governments in Madrid and Rome.
The meetings come in a week in which interest rates on Spanish debt jumped to what investors fear are unsustainable levels above 6 per cent, and as attention turns to the French presidential election, which could install the Socialist Francois Hollande in the Élysée Palace and curb the austerity policies that have so far kept France out of the firing line of the bond market vigilantes.
Bolstering the IMF is the next step, after eurozone finance ministers meeting in Copenhagen last month expanded Europe's in-house bailout fund, the European Stability Mechanism, to €800bn (£655bn). That figure and the $400bn now being sought by Ms Lagarde are lower than those originally talked about at the start of the year, when sovereign debt markets were more turbulent, and they may not prove sufficient to prop up the eurozone in a meltdown scenario, but they do represent a substantial increase in the size of the firewall and therefore make a meltdown scenario less likely.
But will the world leaders get it together this weekend? The G20 group of industrialised and industrialising nations meets first, and several members have already come good on the promise, made six months ago at their last meeting in France, to pledge more to the IMF. Japan has said it will chip in $60bn; Sweden is ready to commit $10bn now and up to $14.7m over time; Denmark is in for $7bn and Norway for $9.6bn.
Eurozone countries have already committed around €150bn and UK officials have indicated they could put in £10bn – the maximum possible without a parliamentary vote – as long as the money is not formally earmarked for use in the eurozone, which would be a no-no with public opinion.
As for the US, the IMF's biggest contributor, it has thumbed its nose at Ms Lagarde's requests. This is a presidential election year, after all, and it is therefore politically impossible to be seen using taxpayer dollars to fund indigent Europeans while the US debt remains so high and the economy so weak.
The big question marks are over the emerging economic powerhouses, notably China, Brazil and India, which appear to be trying to tie an increase in their contributions to the stalled effort to increase their voting power within the institution. Agreements made two years ago for a shake-up that reflects these countries' growing influence and increased contributions are being delayed by the US. Ms Lagarde conceded this week that even if she got specific pledges from these nations before the weekend was out, ironing out the terms and conditions could take weeks or months. When is a deal not a deal? When it's an international communiqué.
Julian Jessop, the chief global economist at Capital Economics, said building firewalls, whether they be the ESM or at the IMF, were just one part of the complex effort to secure the eurozone.
"Hope springs eternal," he said. "We have already had promises of additional money, but even if we reach the expected total, it is quite a leap to go from that to assuming that there would be a big injection from the IMF into Europe in the event of a crisis, and a further leap that a big injection from the IMF would actually make much difference on the ground in Europe."
Mr Jessop said that getting the backers of the IMF, including China, to pledge more of the institution's funds to bail out big eurozone countries would surely require significant movement from eurozone leaders themselves, and probably from the European Central Bank, which could buy sovereign debt directly or roll over long-term funding that the continent's banks can use to finance their holdings of sovereign debt.
Beyond that, as the Institute of International Finance argued last week in an open letter to the leaders gathering in Washington, there are growing calls for an end to an "austerity overload" for peripheral eurozone nations, an overload that risks locking indebted nations into a downward spiral of recession and worsening public finances. The IIF is the lobbying body for the world's largest banks.
So Ms Lagarde might get her headline total of promises this weekend. Then she will need to get the money. And then she will need to press for reform and growth in the eurozone, to make sure that spending the cash won't be throwing good money after bad. Not so easy.Reuse content