FINANCE MINISTERS from Germany, Finland and the Netherlands have called for an “enhanced and strengthened” role for the International Monetary Fund in the effort to gain control over the expanding sovereign debt crisis.
As Belgium became the latest euro zone country to suffer a credit rating downgrade, Dutch finance minister Jan Kees de Jager said there were doubts that a leveraged European Financial Stability Facility (EFSF) bailout fund could stabilise the euro zone and calm restive markets.
In Berlin yesterday evening after talks with his German and Finnish counterparts, Mr de Jager said all favoured increasing IMF resources to facilitate assistance to Spain or Italy “if necessary”.
The intervention is significant as each of the countries has the benefit of a triple-A credit rating and they strive to act together in response to the debt emergency.
The Dutch minister said an increase to the IMF’s firepower would require “substantial” sums of money, but would open up a “separate path” to the ongoing effort to boost the EFSF’s lending capacity.
“This is not a leverage of the European emergency fund with IMF money . . . but IMF money for member states,” he said.
The three ministers said they “discussed ways to explore the improvement of IMF resources, including bilateral loans to the IMF or a general resources increase”.
Although some euro zone sources have been expressing confidence about the effort to increase the EFSF’s lending to €1 trillion from €440 billion, the Berlin meeting and subsequent statements raised doubt over that initiative. EFSF chief executive Klaus Regling will brief euro zone finance ministers on the effort at a scheduled meeting next Tuesday night in Brussels.
European Council president Herman Van Rompuy and European Commission president José Manuel Barroso meet the day before in Washington with US president Barack Obama, who has repeatedly pressed EU leaders to assert control over the crisis.
Standard &Poor’s added to the growing strain on EU leaders last night when it downgraded its assessment of Belgian debt to “AA” from “AA+”.
The agency cited renewed funding and market risk pressure, slower economic growth and concern about the repeated failure of attempts to form a new government after more than 500 days of fruitless talks.
As coalition talks resumed last night after a week-long hiatus, the caretaker Belgian government said the downgrade “strengthens even more the need to finalise as soon as possible” the 2012 budget
The latest SP manoeuvre comes amid anxiety that the advancing crisis is moving rapidly from “periphery” states to “core” countries which had previously been deemed secure.
“This contagion effect has been touching the proximity of the core and even touching the core itself,” EU economics commissioner Olli Rehn told reporters in Rome last night, after a meeting with Italian technocrat prime minister Mario Monti.
Mr Monti inherited a drastic austerity plan from his predecessor Silvio Berlusconi, but the commission has questioned whether more cutbacks and tax increases will be required to ensure Italy balances its budget by 2013.
His meeting with Mr Rehn came on the day that Italy paid a record price to sell €10 billion in six-month bonds, the 6.5 per cent interest rate being almost twice as high as in a comparable sale one month ago.
German finance minister Wolfgang Schäuble declined to comment on a report that said measures to ensure private sector involvement in future bailouts may be dropped from the European Stability Mechanism, the permanent fund that is to replace the EFSF in 2013.
Reuters said France, Italy, Spain and peripheral countries favoured such a move, with Germany, Finland and the Netherlands opposed.
While euro zone officials acknowledged deep divisions over this issue, they said the debate was far from finished.