The International Monetary Fund (IMF) is expected to play a greater role in supporting struggling eurozone economies as finance ministers acknowledged for the first time that attempts to boost the area’s bail-out fund would miss the €1 trillion target.
The eurozone’s 17 finance ministers, who met in Brussels on Tuesday night (29 October), discussed ways to increase the resources of the IMF through bilateral loans, following a mandate agreed at the G20 in Cannes on 3-4 November.
Olli Rehn, the European commissioner for economic and monetary affairs, said after the meeting that there was an agreement on an increase in IMF resources through bilateral loans or through new allocations of special drawing rights.
The aim is for the IMF to match the enhanced firepower of the European Financial Stability Facility (EFSF), although Klaus Regling, its managing director, stated on Tuesday that he was unable to put a figure on how much that would be.
Finance ministers endorsed two separate methods of ‘leveraging’ the EFSF at the meeting, but acknowledged that the eventual total was likely to fall short of the €1 trillion initially envisaged.
The two methods build on an outline agreement reached at the eurozone summit of 26 October. Credit enhancements will insure investors’ purchases of sovereign bonds up to the first 20%-30%, while co-investment funds will be set up to attract foreign investors to buy government bonds. Both schemes could be operational by January.
The meeting also re-approved a €8 billion loan tranche to Greece after austerity pledges from a unity government in Athens.