European Union leaders will urge the G20 leading and emerging economies to double the size of the International Monetary Fund’s arsenal for fighting global recession to $500 billion, a summit draft showed on Friday.
The draft also held out the prospect of the EU offering aid to eastern European states hit hard by the global economic downturn, but rejected US pressure for the 27-nation bloc to inject more money into their own economies to combat the crisis. It said the priority remained to see through existing recovery plans and exercise budgetary restraint.
The EU will propose at the Group of Twenty summit in London on April 2 that leaders agree to "double IMF resources so that the Fund can help its members swiftly and flexibly if they experience balance of payment difficulties," the draft said.
The G20 meeting is intended to produce a plan to put the world economy back on track. The document said the EU was ready to help European countries in trouble on a case-by-case basis and to review continually the ceiling of a €25 billion EU crisis fund which has already been used by Latvia and Hungary.
EU leaders made clear late on Thursday they would not bow to pressure to increase stimulus packages which have failed to reverse the slowdown, although the US Federal Reserve pledged an extra $1 trillion on Wednesday to help the US economy.
“Member states should return to their medium-term budgetary objectives as soon as possible,” the draft said, referring to the drive for balanced budgets which has underpinned the stability of the euro single currency zone.
Reflecting European calls for tighter regulation to avoid a repeat of the financial crisis, the draft called for “appropriate regulation and oversight of all financial markets, products and participants that may present a systemic risk.”
TAX HAVEN BLACKLIST
EU leaders attending a two-day summit in Brussels sought to end a dispute over the branding of European countries as tax havens. Diplomatic sources said there was agreement that no EU state should appear on a blacklist of such countries.
“These countries which have accepted these standards, the are not on this blacklist,” Czech Prime Minister Mirek Topolanek, whose country now holds the EU presidency, told Swiss television of Switzerland and EU members Luxembourg and Austria.
The EU puts the size of its effort to combat recession at anything between 3.3 and 4% of its output, including welfare spending. President Barack Obama plans to devote 5.5% of US output to recovery efforts.
Although the draft gave no figure for an EU contribution to any raising of IMF funds, Belgian Finance Minister Didier Reynders said there was an agreement to pledge $75 billion. “This is quite an amazing amount and is quite enough,” Reynders told Reuters on Thursday.
Britain had said earlier on Thursday it would support new loans of $75-100 billion as part of an internationalize of what a British official called a “contagion of financial instability.”
In a move to ease concern over the hard-hit economies of central and eastern Europe, European Commission President Jose Manuel Barroso proposed doubling to €50 billion an EU fund available to troubled non-euro zone members.
“There seemed to be good support. It was broadly backed,” one diplomat said. A French official said the plan had “strong support” from France, and Sweden confirmed it was in favor.
EU leaders also agreed on a list of schemes to benefit from a further €5 billion of EU funds. Among them, the Nabucco pipeline intended to bypass Russia to bring Caspian gas to Europe won €200 million of funding. (Reuters)