Canada demands EU shore up its crisis fund

(OTTAWA) - The European Union must significantly bolster its own crisis fund before Canada gives more money to the IMF to help prevent eurozone contagion, a senior Canadian official said Thursday.

"Further actions are required in Europe notably to bolster their firewall before we come back to this question of IMF resources," the finance department official told a media briefing ahead of upcoming G20 crisis talks in Mexico.

"We would insist on the need for a much larger and a much more effective firewall generally in Europe so that countries in the periphery that are undergoing adjustment have the necessary liquidity support."

The firewall -- a rescue fund designed to prevent the debt crisis from engulfing other EU members -- must still be topped up by $500 billion, the official said.

"The quantum and effectiveness of the firewall need to be improved." It must be "significantly larger than exists now" and "significantly more effective."

The 17 eurozone nations already pledged in December to contribute 150 billion euros ($192 billion) in the form of bilateral loans to the International Monetary Fund.

They hope emerging countries, which have so far held back, will also participate so the IMF has enough funds to prevent eurozone contagion.

However Mexico's and Japan's finance ministers have said that the G20 is not yet ready to agree on providing more funds to the IMF, while the IMF is looking for Europe to boost the resources of its own rescue fund -- the European Financial Stability Facility (EFSF) -- for fragile countries.

That opinion is shared by Canada and the United States.

The Canadian official also noted that Ottawa is "not worried" about Portugal or other eurozone nations said to be on the brink, pointing to Portugal's fiscal position as "much more sustainable" and Ireland as being "on a firm track."

The Group of 20 largest economies' finance ministers and central bank governors will meet in Mexico on February 25-26 to discuss the global economic outlook, implementation of financial sector reforms, IMF funding, and energy and commodity markets.

Canadian Finance Minister Jim Flaherty will also hold bilateral talks with his German and US counterparts.