MEXICO CITY (Reuters) - Leading economies told Europe it must put up extra money to fight its debt crisis if it wants more help from the rest of the world, piling pressure on Germany to drop its opposition to a bigger European bailout.
Euro zone countries pledged on Sunday at a Group of 20 meetings of finance leaders to reassess the strength of their bailout fund in March, which could clear the way for other G20 countries to contribute more funds to the International Monetary Fund.
“This will provide an essential input in our ongoing consideration to mobilize resources to the IMF,” the G20 said in
the final communique of the two-day meeting of finance ministers and central bankers due to be released later on Sunday.
Germany, as Europe’s largest economy, came under intense pressure to support enlarging the region’s war chest. But facing political hurdles at home, it has sent conflicting signals over whether it was ready to move.
British finance minister George Osborne left no doubt the G20 requires a clear euro-zone commitment.
“We have to see the color of the eurozone’s money first - and, quite frankly, that hasn’t happened. Until it does, there’s no question of extra IMF money from Britain or probably anyone else,” he said.
The G20 is racing to line up massive international resources worth nearly $2 trillion - including existing and new funds - possibly by late April. That would help to draw a line under the financial crisis that erupted in 2008 when Lehman Brothers collapsed, spawned the deepest U.S. recession since the 1930s and now has engulfed Europe’s deeply indebted countries.
It would mark their boldest move since they ploughed $1 trillion into their economies three years ago to combat recession. Many advanced economies are still flooding markets with cheap money to combat weak growth and prevent financial contagion.
Yet the world economic recovery remains patchy and risks remain high that it could stumble, the G20 finance officials said in the communique.
Germany said it would make a decision sometime in March on strengthening Europe’s bailout fund.
The proposal is to combine Europe’s temporary and permanent bailout fund to create a 750 billion euro ($1 trillion) war chest. This would open the door for other G20 countries, like Japan and China, to meet the IMF’s request for $500-$600 billion in new resources, on top of its current $385 billion in funds.
Put together, this would total almost $2 trillion in firepower. The G20 finance chiefs next meet in Washington in late April and they showed they will not ease pressure on Europe by giving it a signal now that new IMF money is in the bag.
U.S. Treasury Secretary Timothy Geithner said on Saturday that Europe had come a long way in laying the foundations for a “credible” crisis response but could not rest there.
“It’s important not to rest on that progress ... That progress is in part based on expectations of more progress to come,” he said.
Additional reporting by the G20 team; Writing by Stella Dawson and Kieran Murray; Editing by William Schomberg