- Created on Sunday, 01 April 2012 17:11
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European leaders said they believed the €200bn increase in their fiscal rescue fund agreed on Friday would be enough to persuade non-eurozone countries that Europeans had "done our homework" and lead them to supplement eurozone efforts by building their own global firewall against contagion.
François Baroin, the French finance minister, said after two days of meetings here with his European counterparts that "Europe has done its part", suggesting it was now up to other large global economies to contribute to an enlarged International Monetary Fund war chest.
Wolfgang Schäuble, the German finance minister, said he wanted to put an end to speculation that the fund would be increased any further, adding that the eurozone has "now given our contribution" and had lived up to its "global responsibility."
"There is no sum with which you can convince financial markets," Mr Schäuble said, referring to the size of the eurozone firewall. "You can only be convincing with structural measures,"
Christine Lagarde, the IMF chief, has sought an additional $500bn for the IMF as a back-up to the eurozone's two rescue funds, which now have a combined ceiling of €700bn. But US and IMF leaders have cautioned that their support for such an increase was contingent on a significant increase in the eurozone funds.
Although the US has said it would not contribute to the new IMF firewall, its support is crucial as the largest IMF shareholder.
US and IMF officials welcomed the eurozone decision, but were cautious about predicting whether it would lead to a commensurate effort by Group of 20 leading economies when they gather in Washington next month for the IMF's spring meetings.
"Today's announcement by the eurogroup reinforces a trajectory of positive efforts to strengthen confidence in the euro area," said US Treasury spokeswoman Natalie Wyeth. "Over the last several months, European leaders have made significant progress in addressing the crisis."
The decision taken on Friday was the least ambitious of three options laid out by the European Commission, which included alternatives to raise the ceiling to as much as €940bn. European Union officials have warned such a minimalist approach may fail to "unlock" funding from non-European G20 countries.
In a statement, Ms Lagarde said the increase to €700bn will "support the IMF's efforts to increase its available resources for the benefit of all our members," and eurozone leaders said they believed the move was enough to get non-eurozone support.
"I think now the Europeans can travel to the spring meeting of the [World] Bank and the fund in Washington having done our homework on European firewalls and this can then be complimented by the global firewalls of the IMF resources," said Jörg Asmussen, a member of the executive board of the European Central Bank.
Olli Rehn, the European Commission's top economic official, noted that eurozone countries had already committed to lending €150bn to the IMF firewall. Although he had advocated a bigger increase, Mr Rehn said he was "satisfied" with the decision and said it should enable G20 countries, including some of the rapidly-developing Bric economies, to participate in the IMF fundraising.
"I trust that today's decision will pave the way for an increase of the IMF resources by the IMF spring meetings next month, in mid-April," he said.