PE’S latest rescue attempt stumbled yesterday as finance ministers failed to agree a plan to put as much money as hoped into the International Monetary Fund’s (IMF) bailout pot.
British representatives stood up to Eurozone leaders who demanded an extra €31bn (£26bn) contribution from the UK, instead favouring a possible global deal in January.
Finance ministers spent the afternoon locked in debate in an attempt to work out how to give the IMF an extra €200bn, which could then be used to bail out Eurozone governments.
In the end they managed to get a commitment for €150bn from Eurozone nations, and are relying on extra donations from countries outside the euro including Sweden and Poland to bolster reserves.
The UK had never agreed to give more under the plan and yesterday chancellor George Osborne held firm in the face of pressure from Eurozone ministers.
A Treasury spokesman told City A.M. “The UK has always been willing to consider further resources for the IMF, but for its global role and as part of a global agreement.”
Because of legal constraints and the need to avoid loans appearing in national deficit figures, the money could come from central banks’ reserves and will be used to help troubled nations anywhere in the world, not just in the Eurozone.
Despite the disagreement, relations between Britain and Germany had appeared to thaw yesterday as foreign minister Guido Westerwelle visited his British counterpart William Hague.
Germany has “no hidden agenda against the City,” Westerwelle said in an effort to improve relations, which became strained after David Cameron rejected new EU treaty plans.
Analysts fear even if the full €200bn target had been raised yesterday, it would still not come close to helping Europe’s predicament.
“€200bn does not really make much difference – Italy alone requires €300bn in refinancing next year,” said Open Europe’s Raoul Ruparel.
And European Central Bank boss Mario Draghi yesterday revealed he fears France will be downgraded, ruining the EU’s own bailout mechanisms.
He again refused to buy up government debt to help struggling nations.
Draghi also told the European Parliament that the ECB was “working actively as the European Financial Stability Fund’s (EFSF) agent on all possible scenarios” of a French credit ratings downgrade.
Meanwhile, Spanish leader Mariano Rajoy pledged deep spending cuts in his maiden parliamentary speech.