Trouble ahead for Cameron as IMF seeks extra £17.5bn funding

Body's desire for buffer to stabilise euro currency crisis could spark Eurosceptic rebellion
  • @NigelpMorris

David Cameron faces a showdown with Tory Eurosceptics over a move to increase Britain's contribution to the International Monetary Fund by up to £17.5bn because of the single currency crisis.

The Prime Minister would have to face a Commons vote before being allowed to hand over the extra cash, inevitably triggering a damaging backbench rebellion.

The IMF warned yesterday that it would need to ask member states, including Britain, for another $600bn (£390bn) to fulfil its mandate of stabilising the global economy. A spokesman said the Fund's resources needed to more than double from $400bn to $1trn to insulate the world against an intensification of the euro's woes. Britain's share of the increase could be $27bn (£17.5bn).

George Osborne, the Chancellor, has already warned that Britain's contribution to IMF coffers could have to increase. And Downing Street confirmed yesterday he was ready to put any "decent" request from the IMF for more money to MPs for approval.

But the potential scale of the demand would infuriate Tory Eurosceptics, who accuse members of the eurozone of failing to take tough enough action to boost their own bailout mechanism. Douglas Carswell MP said: "George Osborne needs to get a grip, and instead of drifting along with Treasury advice, he needs to make clear there will be no more bailouts."

Tory MP Peter Bone said: "The Government would have a good deal of trouble getting this through."

"We are absolutely against putting money into countries where they are in the euro and have no way of devaluing their currencies," he added.

Eighty-one Tory MPs defied their whips in October to demand a referendum on Britain's place in the European Union. Given the state of Euroscepticism on his backbenches, Mr Cameron's fate could rest with Labour's attitude to boosting the IMF.

The IMF said yesterday that it wanted to raise another $500bn in "additional lending resources" and $100bn as a "protection buffer".

Its belief that its resources urgently need to increase signals that it expects the present stabilisation efforts of eurozone leaders to fail and that large European economies, such as Spain and Italy, will need some form of support before too long.

The Chancellor, who has said that it is not the IMF's job to support currencies, will lobby for any additional funds from Britain to be pledged to the IMF's general resources, rather than a special account to help eurozone nations. But there would be nothing to stop the IMF using the additional resources to help Italy or Spain if they did need assistance.

Speaking yesterday after talks with Italian Prime Minister Mario Monti, Mr Cameron said: "We are founder members and great supporters of the IMF. It's a key international institution.

"We set out our conditions at the Cannes G20 summit about expansion of the IMF. We believe the IMF must always lend to countries, not to currencies. We would only act if that was with others, not just as part of a eurozone measure. But above all, we want to see the eurozone standing behind its own currency."