G-20 mulled IMF currency to support EU rescue fund: Germany

5th November 2011, Comments 0 comments

Some leaders at this week's G-20 summit in Cannes suggested resorting to the International Monetary Fund's own notional currency to support the crucial EU bailout fund, Germany said Saturday.

The German government promptly rejected the idea, which involved resorting to the Special Drawing Rights (SDR) -- an international reserve asset created by the IMF in 1969 and based on a basket of international currencies -- to increase the firepower of the European Financial Stability Facility (EFSF).

"Some Cannes participants brought up the issue as to whether SDRs might be used to boost the EFSF's efficiency," government spokesman Steffen Seibert said.

According to the Frankfurter Allgemeine Zeitung's Sunday issue, several G-20 participants wanted central banks to contribute 50 to 60 billion euros worth of SDRs to finance a beefed-up EFSF.

The Welt Am Sonntag newspaper said it the Bundesbank saw it as an attack on its sovereignty.

It was the Bundesbank's opposition to the plan -- which the paper said was floated by French President Nicolas Sarkozy, US President Barack Obama and British Prime Minister David Cameron -- that led to German Chancellor Angela Merkel's veto.

Seibert denied reports that the SDR issue would be discussed again at a meeting of eurozone finance ministers on Monday.

The EFSF was created by members of the European Union's monetary bloc to combat the sovereign debt crisis and assist member states in economic difficulty.

Its lending capacity was raised last month to 440 billion euros but European leaders want to further increase it in order to face a spiralling debt crisis.

© 2011 AFP

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