Brussels: European Union finance ministers said on Wednesday that they are ready to pledge an extra $75 billion to the International Monetary Fund to help it lend more to countries suffering from the global economic downturn.
That will increase Europe’s contribution from €75 billion ($100 billion) to €125 billion ($175 billion)—more than a third of the $500 billion the IMF is looking for.
Sweden’s Anders Borg said the 27-nation bloc knew that “we have to put our money where our mouth is” on the EU’s demands for the IMF to play a bigger role in the global economy as part of a raft of financial reforms Europe wants to agree with the Group of 20 leading world economies.
So far G-20 nations—including the US and China—have pledged $411.5 billion to the IMF’s new lending facility.
Germany, France and British finance ministers said on Monday that Europe should plug that gap. Germany is promising €25.03 billion ($35.95 billion), France will give €18.45 billion ($26.5 billion) and Britain will up its share by an extra $11 billion to $26 billion.
German Finance Minister Peer Steinbrueck and his French colleague Christine Lagarde have linked this to discussions over voting weight in the IMF where European nations are expected to give up some say to emerging economies such as Brazil, India and China.
“Maintaining a significant share would ensure that EU member states’ views are adequately represented,” they said.
The European Union is also looking for G-20 nations to sign up to tighter financial market supervision, building on a crackdown on tax havens that launched last year.
French President Nicolas Sarkozy is pushing hard for the next G-20 summit in Pittsburgh, Pennsylvania on 24-25 September to restrict bonuses to bank executives, which he says would discourage excessive risk-taking.
The EU’s 27 nations hold separate seats at the IMF and can vote as they like. Together they share 32% of IMF votes and have so far resisted any suggestion that they take one European seat. Reform may see mid-sized EU countries such as Italy, Spain and the Netherlands lose some say.
Borg told reporters that smaller EU nations still have to decide how much each of them will pledge to meet the EU goal.
The EU’s funding boost would represent around 35% of the IMF’s new lending facility.
The IMF can extend credit to governments that urgently need money to cover the gap between tax revenue and public spending. The sudden economic downturn has caused Ukraine, Nigeria, Pakistan, Sri Lanka, Mexico, Iceland, Serbia, Belarus and two EU nations—Hungary and Latvia—to seek IMF help.