Eurozone: UK 'ready to back IMF bailouts'

 

Britain is standing by to give more money to the IMF so that it can, in turn, lend more money to Eurozone countries like Greece, Italy or Spain who are struggling to service their debts.

The government now believes, I'm told, that there are only three ways out of the current crisis - the first they hope for, the second they fear and the third they are ready to accept.

The three are:

1. Eurozone leaders succeed in getting last week's deal back on track despite Greece's plan to use a referendum to secure a better deal

2. Greece leaves the euro

3. Enhanced IMF funding for the Eurozone's struggling economies

Reuters reports that China's deputy finance minister Zhu Guangyao revealed tonight that the third option is already under active discussion in Cannes in advance of the G20 summit.

The politics, here at home, are complex for a government pledged not to spend British taxpayers' money on propping up the euro.

However, Chancellor George Osborne has been very, very careful to leave himself room to do just that so long as it's via the IMF and given not to the Eurozone bail out fund but directly to individual countries.

In the Commons last Thursday, Mr Osborne reassured his backbenchers and won himself favourable headlines in the Eurosceptic press when he said: "Britain will not be putting money into the bail out fund either directly or through the IMF... the IMF exists to support countries, it does not exist to support currencies.

"The IMF contributing money to the eurozone bail out fund, no; Britain contributing money to the eurozone bail out fund, no. That is Britain's clear position."

However, with an eye to the future he added: "Supporting countries that cannot support themselves is what the IMF exists to do, and there may well be a case for further increasing the resources of the IMF to keep pace with the size of the global economy.

"Britain, as a founding and permanent member of its governing board, stands ready to consider the case for further resources and contribute with other countries if necessary."

If this happens the chancellor will stress that the increase in IMF resources will be used to help many countries outside Europe. True, but they would also be used to help quite a few inside too.

The Treasury is keen to stress the distinction between the taxpayer putting money into the IMF for use around the world, and giving it directly to the Eurozone.

It points out that the IMF has programmes in 53 countries - of which only three are in the Eurozone - and that no country who's lent money to the IMF has ever lost it.

Thus, they argue that saying that the British taxpayer will be bailing out the euro is like saying that Brazilian, Indian and Chinese taxpayers are doing the same.

UPDATE 11.48am: David Cameron in Cannes has just told me "I'm here to support the British economy. When the world is in crisis it is right to consider boosting the IMF."

He added: "No government lost money by lending money to the IMF. There is no risk to british taxpayers of seeing the IMF perform its proper role that's what we have always supported."

 
Nick Robinson, Political editor Article written by Nick Robinson Nick Robinson Political editor

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Comments

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  • rate this
    +7

    Comment number 1.

    Are you deaf or just plain stupid Cameron? Nicolas Napoleon Sarkozy this week orderd you to keep the Britisher's noses out of European financial affairs as we are a second rate European nation. So why do you not do as you are told? Disobedient twerp. Will the reduction in old age pensioner’s winter fuel allowanceprovide the money to help avoid the collapse of the French banking system?

  • rate this
    +2

    Comment number 2.

    I hear Cannes is lovely at this time of the year. Perhaps Sarkozy and Merkel (clearly joined at the hip) are more concerned about their reputations and elections, due quite soon, and want to make the Euro look nice and tidy when they leave, rather than admit the imposed Euro, as a currency, has failed and costs ALL Members of the European Union too much - whether using the Euro or not.

  • rate this
    +1

    Comment number 3.

    The IMF - wow, that must be some account. Do they pay interest on that?
    Whose on the Board, how much are they paid? How much are the IMF employees paid? Are their accounts as transparent as the EU Commission or Europa?

    That's fine that Britain is bailing out the Euro, indirectly, amongst others. That way it's a loan by British tax-payers, because we bailed-out banks that are still causing havoc!

  • rate this
    +4

    Comment number 4.

    I don't see how the UK will loan money to Greece except through this method.
    The bail-out money withheld pretty much makes it a moot point anyway.
    Greece will now default , it does not have enough money to last until Dec 3rd.
    Once out of the euro, UK money and money from other IMF countries will be needed in Greece.
    They would pretty much be debt free but unable to get any Bank credit.
    Win Win

  • rate this
    -2

    Comment number 5.

    Oh, well. As long as our contribution helps France to maintain her French way of life, which will be 'damaged' if Greece defaults. French banks are most exposed to Greek debt.

    As usual, France always gets what France wants. Sigh.

 

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