The US and UK rejected suggestions from emerging market countries that the International Monetary Fund needed more firepower to fight the eurozone crisis, creating a discordant start to the Group of 20 finance ministers meeting in Paris.
Tim Geithner, US Treasury secretary said the Fund had “very substantial resources that are uncommitted”, while other non-eurozone countries insisted that it was for Europeans to resolve the crisis themselves.
The emerging economies’ offer put the UK in a particularly difficult position because David Cameron, prime minister, called this week for a much bigger “bazooka” to prevent contagion spreading from Greece, through Spain and Italy to the rest of the world economy, but does not want to commit UK funds to the effort.
Opposing new funds for the IMF, finance ministers from the US, UK, Japan, Canada and Australia rejected the idea of indirectly committing more of their own taxpayers’ resources to fight fires in the eurozone.
The move to dampen speculation of a new IMF element to help resolve the continuing eurozone crisis came after emerging economies suggested the Fund could create more firepower to intervene in financial markets and produce a confidence boosting announcement for the G20 at its summit next month in Cannes.
A UK Treasury official insisted there was no proposal yet on the table for an IMF “bazooka” to support the eurozone and the official refused to say how the UK would respond to any IMF action to underwrite the debts of Spain and Italy alongside the European financial stability facility.
Other non-eurozone economies also kept their cards close to their chests when asked whether they would support the offer of assistance from emerging countries via the IMF – action which, if implemented, would reinforce the poorer countries claims for more influence over global economic debates.
The issue of the potential IMF support for a eurozone rescue package will dominate the G20 meeting, starting on Friday evening and running through Saturday, the delegations said.
Earlier on Friday, Guido Mantega, Brazil’s finance minister, confirmed the Financial Times story that emerging countries were in talks on boosting IMF resources to aid the eurozone. Speaking to journalists before the meeting, he claimed a consensus within the G20 existed on the need to boost the IMF’s resources in case the global crisis deepened.
His claims were not supported by other advanced countries. Mr Geithner said the Fund was adequately resourced, as was the eurozone itself. He added that he was happy, nevertheless “to see the IMF play a continuing role, as it’s been playing, in supporting what Europe has been doing.”
Mr Geithner was backed by other non-eurozone advanced economies in stressing the view that the single currency must resolve its own problems. George Osborne, UK chancellor, said, “the biggest boost to global and British growth would be a resolution of the eurozone crisis”.
Jim Flaherty, Canada’s finance minister, said the IMF should not become the focus of efforts to solve the crisis, while Wayne Swann, Australia’s finance minister, said “The first priority here is for Europeans to put their own house in order”.
With European leaders under pressure at the G20 to show progress on their plans to stabilise the eurozone, François Baroin, French finance minister, host of the weekend meeting, said France and Germany had “already come to a number of agreements that will be very important” in achieving a package for agreement at next weekend’s European summit in Brussels.
Speaking after a meeting with President Nicolas Sarkozy and Wolfgang Schäuble, German finance minister, Mr Baroin said the two sides were now “well advanced on a common project” for bank recapitalisation, although he gave no details.
He said they had also discussed ways of “maximising the effectiveness” of the European financial stability facility. France wants to make the eurozone rescue fund into a bank, but has shifted focus in the face of opposition from Germany and the European Central Bank. Paris has now signalled its support for allowing the EFSF to guarantee a portion of sovereign debt for countries such as Italy and Spain.