US rejects plan to strengthen IMF

Proposals to double the size of the IMF as part of a broader international response to Europe's debt crisis have immediately run into resistance from the US and others, burying the idea for now and firmly putting the onus back on Europe.

The plan had been tabled by emerging markets such as Brazil and China and backed by others such as India and South Africa, and was negotiated alongside the meeting of Group of 20 deputy finance ministers in Paris before the finance minister meetings began.

The emerging markets had supported the idea of raising the IMF's firepower to help solve the Eurozone debt problem. The sovereign debt crisis is dominating the G20 meetings despite the global focus of the Group.

One G20 source said some policymakers backed injecting some $350bn (£222bn) into the International Monetary Fund. Other options under consideration included loans, special purpose vehicles and note purchase agreements.

Treasury Secretary Timothy Geithner wasted no time in shooting the idea down. The IMF's dominant shareholders, including the US, Japan, Germany and China, are content that the fund's $380bn worth of resources is enough. Canada and Australia also voiced opposition.

"They (the IMF) have very substantial resources that are uncommitted," Geithner said.

The US is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.

"The first priority here is for Europeans to put their own house in order," Australian finance minister Wayne Swan said.

The finance ministers of France and Germany, under pressure from the rest of the world to act in concert, made a fresh commitment to have a plan for the euro zone in place before a summit of G20 leaders in Cannes on November 3/4.

Speaking after a lunch meeting with President Nicolas Sarkozy, French Finance Minister Francois Baroin said: "We will continue our discussions in the coming days but we have already come to some agreements that will be very important."

If minds needed concentrating further, the downgrade of Spain's credit rating a few hours earlier highlighted the risk of a much larger economy than Greece coming under threat.