Bundesbank says not fundamentally opposed to loans to IMF

9th December 2011, Comments 0 comments

The Bundesbank is not "fundamentally opposed" to bilateral loans to the International Monetary Fund to help fight the region's debt crisis, a central bank spokesman said Friday.

"We're discussing with the government on the modalities" of such loans, the spokesman said.

At an EU summit in Brussels on Friday, eurozone countries agreed to pump 200 billion euros ($267 million) into an IMF warchest so it can help debt-mired eurozone states.

Eurozone finance ministers decided last month to turn to the IMF for help after they were unable to increase the firepower of the bloc's 440-billion-euro bailout fund to one trillion euros.

The Washington-based IMF has just under 300 billion euros left in its coffers, not nearly enough to rescue a big economy like Italy, which has debt of 1.9 trillion euros and needs to refinance 400 billion euros next year.

With the United States opposed to a general increase of the IMF's resources, one option is voluntary bilateral contributions from European nations or emerging economies.

The IMF acknowledged last week that it would need more resources if the crisis deepens and suggested that loans could come from eurozone central banks.

Nevertheless, European Central Bank president Mario Draghi was cool on the idea of the Frankfurt-based institution making available funding to the IMF since the ECB was "not a member of the IMF" and that such a financial arrangement would be legally complex.

It would contravene the EU treaty if the IMF used ECB loans to buy bonds of distressed eurozone nations, Draghi said.

The Bundesbank spokesman insisted it was "important that we stick to the IMF's framework," saying funds should be transferred to the IMF's general account and not to any vehicles created specifically for lending back to the eurozone.

© 2011 AFP

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