EU short on IMF loans target as Britain refuses aid

20th December 2011, Comments 0 comments

The EU has fallen short of a target for loans to the IMF destined for a eurozone bailout, with Britain leaving its EU partners in the lurch for the second time this month.

Eurozone chief Jean-Claude Juncker said the 17 countries that share the single currency pledged 150 billion euros ($195 billion) in bilateral loans for the International Monetary Fund late on Monday.

The European Union hopes the money can help stabilise the debt-laden euro area.

But European Union leaders had called at a December 9 summit for 200 billion euros, and Britain's refusal to stump up its roughly 30-billion share meant the results of a Monday night conference call auction left markets underwhelmed.

After mixed messages also from European Central Bank chief Mario Draghi in a high-profile press interview and before a key European Parliament committee, Wall Street ended the day down 0.84 percent in thin trade, with Europe's main markets also down at open on Tuesday.

"We will not contribute to anything that is only available to eurozone countries," a British government official in London told AFP.

"Nor will we participate in an increase in IMF resources that only comes from EU countries without the participation of other G20 countries" outside the EU, he added.

The IMF currently has less than 300 billion euros available for lending to countries that enter reform programmes.

Germany will provide 41.5 billion euros, France 31.4 billion, Italy 23.48 billion, Spain 14.86 billion, the Netherlands 13.86 billion and Belgium 9.99 billion.

Juncker said that Britain would "define its contribution early in the new year in the framework of the G20."

But a senior EU official said finance minister George Osborne's refusal to budge caused "bitterness" among counterparts, on tenterhooks after being put on a downgrade watch by international credit rating agencies.

One of the biggest, Fitch, has already warned that a meaningful solution to the debt crisis may prove "beyond reach" of the EU.

The head of the German central bank said last week that its payout will be conditional on the United States and other major Group of 20 contributors taking a "fair" burden-share.

"If large members, for example the US, were to say 'we're not taking part,' then from our point of view it is problematic," he said.

Russia last week suggested that it could contribute up to $20 billion in loans and investments via the IMF. But China, India and Brazil have yet to go that far.

Like other major economies, the United States needs the eurozone to be a healthy trading partner if worldwide recession in 2012 is to be avoided.

IMF chief Christine Lagarde said on Tuesday that the world economy is at "a very dangerous juncture."

The latest sign London is out of synch with broader EU goals came 10 days after Prime Minister David Cameron vetoed an EU treaty change and opted out of a pact to create a new "fiscal union."

The first talks on designing a new legal framework for that new "union" within the EU will start at 2:30 pm (1330 GMT) on Tuesday in Brussels.

© 2011 AFP

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