EU debates how to recruit IMF in crisis response
(BRUSSELS) - European leaders are mulling ways to fill up the IMF's warchest to help the eurozone, amid warnings that even bringing the international lender on board would not be a silver bullet in the debt crisis.
The idea was among a raft of options on the table at a European Union summit in Brussels on Thursday as leaders tried to negotiate a comprehensive deal aimed at drawing a line under the two-year-old crisis.
Arriving at the crunch talks, IMF chief Christine Lagarde pledged that her institution "will participate" in the eurozone efforts to stem the crisis but called for "coordinated and decisive" efforts.
The plans under consideration would see the national central banks of the eurozone's 17 member states providing 150 billion euros ($200 billion) in loans to the IMF, according to sources familiar with the talks.
The EU's 10 other nations would put another 50 billion euros in the pot.
"It has not been decided. It's just a proposal for now," a European diplomat said.
A source in the German government, which has resisted any solution that would require eurozone states to dole out more money, said there was "no European deal on this yet" and that no decision was expected at the summit.
Eurozone finance ministers decided last month to turn to the IMF for help after they were unable to increase the firepower of the bloc's 440-billion-euro bailout fund to one trillion euros.
The IMF has just under 300 billion euros left in its coffers for its members, not nearly enough to rescue a big economy like Italy, which has debt of 1.9 trillion euros and needs to refinance 400 billion euros next year.
With the United States opposed to a general increase of the IMF's resources, one option is voluntary bilateral contributions from European nations or emerging economies.
The IMF acknowledged last week that it would need more resources if the crisis deepens and suggested that loans could come from eurozone central banks. A European Central Bank participation may be possible too.
Such a solution may sidestep German opposition to a bigger ECB intervention in the debt crisis. Experts in Washington also believe it would be legal.
Several sources say the IMF would be ready to help Italy if needed, but only if the ECB also participates.
But ECB President Mario Draghi poured cold water on the idea, saying the Frankfurt-based institution was "not a member of the IMF" and that such a financial arrangement would be legally complex.
It would contravene the EU treaty if the IMF used ECB loans to buy bonds of distressed eurozone nations, Draghi said.
The plans under consideration at the summit would see the IMF use loans provided by European central banks to grant aid to nations in financial trouble such as Italy or Spain.
But Draghi also dampened expectations of roles for national central banks, warning that "the spirit of the (EU) treaty is that one cannot channel money in a way to circumvent the treaty provisions."
In any case, a pumped up IMF would not suffice to save the eurozone as its capacity to help would remain limited, officials warned.
"It is not a miracle solution," Luxembourg Prime Minister Jean-Claude Juncker, head of the group of eurozone finance ministers. "Most of the effort must be taken up by eurozone members."
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