November 29, 2011 / 11:19 PM / 6 years ago

Euro zone ministers agree to quickly boost IMF resources

BRUSSELS, Nov 29 (Reuters) - Euro zone finance ministers agreed on Tuesday to explore ways of boosting the IMF’s resources through bilateral loans so that the international lender can match the leveraged capabilities of the euro zone’s bailout fund.

“We agreed to rapidly explore an increase of the resources of the IMF through bilateral loans, following the mandate from the G20 Cannes summit, so that the IMF could adequately match the new firepower of the EFSF and cooperate even more closely,” the chairman of the ministers, Jean-Claude Juncker, said.

The ministers agreed on Tuesday on two ways to leverage the firepower of their bailout fund, the 440-billion-euro European Financial Stability Facility (EFSF), using both an insurance scheme and a co-investment programme.

The EFSF has around 250 billion euros of its capacity remaining and could multiply that number several times if it is able to attract outside private investors to buy bonds at primary auctions or traded on the secondary market.

The IMF’s lending capacity now is $380 billion or around 290 billion euros.

The head of the EFSF, Klaus Regling, said it was not possible to put a single figure on the size of the EFSF once leveraged, despite EU leaders expecting that it would stretch to 1 trillion euros once scaled up.

“It is really not possible to give one number for leveraging because it is a process,” he said. “We will not give out a hundred billion next month, we will need money as we go along. If some member states ask for assistance, they will have to make a request, so all this is unpredictable and market conditions vary over time.”

Juncker did not elaborate on how the bilateral loans for the IMF could be raised, but a euro zone source familiar with the discussions said earlier on Tuesday the money was likely to come not from governments, but from national euro zone central banks.

EU Economic and Monetary Affairs Commissioner Olli Rehn said there was broad support among the 17 countries using the euro for the plan, which would boost their capability to financially help even its larger economies like Spain or Italy.

“We are, together with the IMF, consulting potential contributors. But among the euro member states there is very important support to increase IMF resources,” Rehn said.

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