Japan, UK finmins call for less IMF reliance-FT

LONDON Feb 22 (Reuters) - The euro zone needs to bolster its rescue fund and do more to find a long-term solution to its debt crisis before Japan and Britain will consider boosting their contributions to the IMF, according to the finance ministers of the two countries.

In an opinion piece for the Financial Times, UK finance minister George Osborne and his Japanese counterpart, Jun Azumi, said they would only contribute to boosting the International Monetary Fund's resources if strict conditions were met.

Their remarks were published before the Feb. 25-26 meeting of G20 finance ministers in Mexico and come just a day after euro zone finance ministers approved a 130 billion euro ($172.13 billion) bailout package for Greece.

"Euro zone countries have made progress, but more needs to be done to reach a lasting solution. Japan and Britain are longstanding supporters of the IMF and stand ready to play our part in the global effort if certain conditions are met," Osborne and Azumi wrote.

They said they would not support any new funds specific to the euro zone and said any help must be subject to full IMF conditions. Moreover, the additional resources should be drawn from a wide range of countries.

"Crucially, IMF resources cannot be a substitute for further steps by the euro zone to support its currency. The euro zone must increase the resources of its firewall so the markets can be reassured that it can respond to any eventuality," they added.

The IMF is seeking to more than double its firepower by raising an extra $600 billion (379 billion pounds) to help countries deal with the fallout from the debt crisis, but the plan faces resistance from countries, including the United States and Canada.

Many countries outside the 17-member euro zone say the region must first put up more of its own money to contain contagion, for example by combining the lending abilities of its two bailout funds, which together would add up to about 750 billion euros of still-uncommitted funds.

Osborne and Azumi also urged their G20 counterparts to follow through on their commitments to implement financial regulation reforms.

"We must implement our G20 commitments in an internationally consistent way, ensuring that the implicit taxpayer guarantee is eliminated. We need rigorous implementation of the agreement on minimum standards for bank capital, liquidity and leverage," they wrote, singling out over-the-counter derivatives as an area of concern.

They also reiterated their concern about the impact of the proposed U.S. Volcker Rule on their government bond markets.

"It could reduce liquidity in non-US sovereign markets, making it more difficult, costlier and riskier for countries to issue and distribute debt. At such a vulnerable time in the sovereign debt markets, it would be the wrong prescription," they wrote.

"The rule could also disincentivise foreign companies from transacting with their U.S. counterparties, reducing market liquidity and potentially increasing price volatility regarding financial transactions such as foreign exchange swaps," they said.

The rule, named after former Federal Reserve Chairman Paul Volcker, aims to prevent banks from carrying out speculative trades for their own profit and is designed to stop banks taking risks with customer deposits.

Canada and the European Union have also expressed concern about the effect of the rule on sovereign bond markets.