David Cameron presses G20 to 'boost IMF'
Thursday 03 November 2011
British taxpayers could be asked to put more cash behind efforts to shore up confidence in the global economy, amid the continuing crisis in the eurozone, it was confirmed today.
Prime Minister David Cameron used the G20 summit in France to press for an increase in the resources available to the International Monetary Fund (IMF) to support ailing economies.
The summit opened against the backdrop of remarkable scenes in Athens, where Greek Prime Minister George Papandreou dramatically signalled he was ready to call off the referendum which is threatening to derail the eurozone bailout of his country's economy.
Updates from Greece were regularly reported to the meeting of heads of government and finance ministers of the Group of 20 leading economies in Cannes.
Some ministers were consulting their BlackBerrys during the talks to check on the latest reports from Athens, amid confusion over whether Mr Papandreou had resigned, cancelled the ballot or called for a national unity government.
Chancellor George Osborne said that eurozone leaders in the G20 - including France, Germany and Italy - had shown "a real sense of urgency" about resolving the sovereign debt crisis which has plagued the single currency area for two years.
Britain was maintaining pressure on the 17 eurozone states to implement the measures in the October 26 bailout package, including a 50% write-off of Greece's debt and an increase in the eurozone's bailout fund to a massive one trillion euro (£870 billion).
But Mr Cameron and Mr Osborne stood firm on their insistence that Britain would not contribute directly or indirectly to a eurozone bailout fund.
Sources said it was clear that "strong political pressure" was put on Mr Papandreou to sort out the obstacles to a bailout when he met French President Nicolas Sarkozy and German Chancellor Angela Merkel for eve-of-summit crisis talks.
And US President Barack Obama said it was vital to use the G20 meeting to nail down details of the rescue plan.
"The most important aspect of our task over the next few days is to resolve the financial crisis here in Europe," said Mr Obama.
He acknowledged that the EU had made "some important steps towards a comprehensive solution", but added: "Here at the G20 we are going to have to flesh out more of the details about how the plan will be fully and decisively implemented."
The decision of the European Central Bank's new head Mario Draghi to boost growth by cutting eurozone interest rates from 1.5% to 1.25% was welcomed in Cannes.
But doubts remained over whether cash-rich countries like China would be willing to contribute towards the bailout fund through a mooted special purpose vehicle.
It is thought Beijing may be happier to ramp up its backing for the general IMF resources for loans to countries which get into difficulties.
And Mr Cameron and Mr Osborne left little doubt that Britain was prepared to consider a hike in its commitment, which currently stands at around £29 billion - 4.5% of the total £600 billion available to the IMF.
Officials stressed that any increased IMF resources would be available to any state in financial difficulties around the world, not just to single currency members.
But there is certain to be political controversy in the UK if the first states to make a claim on the money are beleaguered eurozone nations like Italy or Spain.
Mr Cameron said: "Let's be clear, when the world is in crisis, it's right that you consider boosting the IMF - an organisation founded by Britain, in which we're a leading player.
"No government ever lost money by lending money to the IMF, which supports countries right around the world.
"What we wouldn't support is the IMF investing directly in some euro bailout fund. That wouldn't be right and we won't back it.
"There is no risk to the British taxpayer of seeing the IMF play its proper role. That's what we've always supported."
Officials stressed that no figure had yet been proposed for an enhanced IMF fund or any potential increase in the UK contribution. No changes in the quotas contributed by different IMF shareholders are envisaged.
Mr Osborne said discussions on IMF funding were not expected to conclude before tomorrow, and aides suggested that decisions on precise figures may not be reached before the G20 breaks up on Friday afternoon.
The Chancellor said there was "a general willingness around the table to contemplate and consider an increase in IMF resourcing".
The UK has always been a supporter of the IMF and said it would be "strange" if it "walked away" from the international financial body at a time of global crisis, he said.
The Chancellor denied the proposal was a panic response to the risk of collapse in last week's eurozone deal, insisting it had been discussed at the IMF's annual meeting in Washington last month.
He regards standing behind the IMF as an extremely low-risk option, as the body is a "senior creditor" whose loans are always first in the queue to be repaid.
Britain's exposure to the IMF does not increase the national debt or deficit, as the funds are treated as part of the UK's foreign currency reserves.
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