The (International Monetary Fund) IMF announced January 18 that it plans to hunt down an extra $600bn. That will likely send it cap in hand to the BRICS, especially with EU members - increasingly led by Central European states - now showing growing unwillingness to fund the extra €200bn agreed as part of the Eurozone fiscal pact in December.
On the same day as the IMF announcement, the Czech government, which originally agreed to vote on the fiscal compact in parliament, decided instead to put it to the mildly EU-sceptic population in a referendum. Meanwhile, the Polish government - which led the cheer leading for the plan last month - also threatened to pull out of the agreement and stop its cheque. The government of Prime Minister Donald Tusk has become increasingly unhappy that, as a non-Eurozone country, it's being left out of the decision-making process.
The IMF currently has a total borrowing capacity of about $590bn, with lending commitments at a record $250bn, but may need at least $1 trillion to fire at the crisis in the coming years. "Based on staff's estimate of global potential financing needs of about $1 trillion in the coming years, the Fund would aim to raise up to $500bn in additional lending resources," the IMF said. Another $100bn will bought sought as a 'protection buffer'."
That total figure includes the €200bn agreed as part of the fiscal compact, which will also allow Brussels to implement stricter discipline on countries that sign up. That will leave a further $350bn or so to be found, which, given that the US moved the same day to insist it won't help, is likely to resurrect speculation that Europe will need to go to the BRICS and other major emerging economies with significant fiscal reserves to find the rest.
At the same time, Chinese and Russian demands for increased influence in international institutions and for concessions on trade issues in return for the cash will still likely stir up resistance. "At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations with the Fund's membership have been completed," the IMF said.
The news that the IMF is hunting for even larger contributions will do little to brighten the outlook for the fiscal pact in Prague, numerous officials having already spent the last month casting doubt on their willingness to stump up the CZK90bn (€3.5bn) they have been asked to commit. With local media speculating through the week that the government is looking to cut the figure in half, Prime Minister Petr Necas finally came out of the woodwork ahead of Wednesday's cabinet meeting to definitively rule out making the full commitment, insisting that any eventual sum will be "significantly lower," reports AP.
That said, the IMF's intention to look outside the EU for the extra funds should cheer Necas up somewhat, after he complained that without significant contributions from outside the bloc the increased contributions would be fruitless, reports the Wall Street Journal. "Any possible bilateral loan should be based on fair burden-sharing among the EU and non-EU countries. If there is no strong support outside of the EU, the loan would be de facto useless-given its size, it would only be a symbolic step, but nothing more," Necas said.
Meanwhile, to the north in Warsaw, "Merkozy" risk losing their keenest supporter from outside the Eurozone after Tusk threatened that Poland could pull out of the pact unless it is invited into the decision-making process, with countries inside the singe-currency keen to keep it to themselves, reports AFP. "We'll see whether we'll gain some kind of status allowing Poland to participate in some way," Tusk complained. "The final decision on this issue will, in my opinion, determine whether or not Poland should participate in the fiscal pact or not."
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