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7th Aug 2020

EU conference call to seek clarity on IMF funding

  • EU leaders have pledged €200 billion to the IMF (Photo: Stephanie Jones)

A conference call among all 27 EU finance ministers on Monday (19 December) will seek to pin down commitments on the planned €200 billion contribution to the International Monetary Fund aimed at helping the eurozone - although markets deeply sceptical about whether the move will help.

The conference call is to kick off at 3.30pm Brussels time and will "mostly" be devoted to the IMF contributions, as a self-imposed deadline agreed among EU leaders on 9 December is running out on Monday, one EU diplomat told this website.

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Markets and ratings agencies have been unconvinced by the deal thrashed out on 9 December, which included a pledge to boost the IMF's coffers by €200 billion, as well as a new inter-governmental treaty on fiscal discipline. Leaders also said they would "welcome" contributions from non-EU countries.

"We all know that Europe has not been able to convince markets that its governance set-up and its measures against the crisis were enough," Italian deputy economy minister Vittorio Grilli said in an interview published on Sunday in Il Sole 24 Ore.

So far, only Russia has signalled it may contribute to the IMF scheme. Germany's central bank, meanwhile, has warned it would only pay its €45 billion share if other non-EU countries chip in.

Britain, whose Prime Minister David Cameron has opposed strengthening the fiscal rules for all 27 EU member states, leading to a rupture with France and Germany, may be asked to contribute with €30.9 billion, the Daily Telegraph reported.

Last week, however, Cameron promised MPs Britain will not participated in the special IMF fund to be set up for the eurozone rescue, although he was in favour of boosting the fund's general coffers aimed at helping "countries, not currencies."

"We did not agree any increase in bilateral resources last week," a spokesman for Cameron said Friday. "We made very clear in that meeting that we were not contributing to those €200 billion."

Belgium has promised €9.5 billion, while non-euro member Denmark and Sweden have said they would set aside €5.4 billion and €11 billion, respectively. Several other countries, such as Poland, have indicated they will contribute to the IMF fund, without giving the exact sums.

The spat between Britain and the Franco-German tandem has "saddened" European Central Bank chief Mario Draghi, who in an interview with the Financial Times said "the UK needs Europe and Europe needs the UK."

Breaking a taboo of his predecessor, Draghi spoke of the risks entailed by a possible eurozone break-up: "Leaving the euro area, devaluing your currency, you create a big inflation, and at the end of that road, the country would have to undertake the same reforms that were due to begin with, but in a much weaker position."

As for the remaining countries in the single currency area, the exit of one country would mean a "substantial breach of the existing treaty."

"And when one starts with this you never know how it ends really," he warned.

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