US opposition to proposed IMF boost leaves eurozone to deal with crisis

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The US yesterday quashed proposals to double the size of the International Monetary Fund in response to the eurozone crisis, leaving Europe to deal with the turmoil.

The idea of bolstering the IMF emerged as G20 finance ministers and central bankers began meeting in Paris with the eurozone's debt troubles looming over the global economy.

Some policymakers were said to have supported pumping about $350bn (£221bn) into the IMF. But the US, along with other big IMF shareholders such as China, Japan and Germany, argued that the fund's existing $380bn firepower was enough.

Timothy Geithner, US Treasury Secretary, pictured, said: "They have very substantial resources that are uncommitted."

The US leads a group of countries exasperated by the slowness of eurozone governments in reacting to the region's debt crisis.

Wayne Swan, the finance minister of Australia, which opposed the IMF expansion, said: "The first priority here is for Europeans to put their own house in order."

The French finance minister, Francois Baroin, said that important agreements had already been made at the G20 meeting.

Further pressure was heaped on the eurozone contingent when Standard & Poor's downgraded Spain's long-term credit rating by one notch to AA-, blaming the country's high private sector debt, soaring unemployment and credit shortage. The nightmare scenario for Europe's leaders is that a major country, such as Spain or Italy, is forced to default – an event that would dwarf Greece's fiscal troubles.

The downgrade of Spain produced an angry reaction from the country's treasury, which said: "S&P underestimates the scope of the unprecedented structural reforms undertaken, which will obviously take time to bear fruit."

The yield on Spain's 10-year debt widened by 9 basis points to 5.258 per cent despite reports that the European Central Bank was buying the bonds.

Elsewhere, markets were relatively calm. The Eurostoxx 50 index closed up 1 per cent and the Dow Jones Industrial Average rose 0.6 per cent in early afternoon trading in New York