27 February 2012

Bloomberg: Germany's crisis role under pressure as G20 rebuffs call to help Europe

The decision by the G20 to rebuff European calls for assistance in their crisis-fighting effort - pending an increase in its own financial backstop - puts the onus on Germany, already the biggest national contributor to bailouts, to overcome its resistance to doing more.

With a parliamentary vote on a second Greek aid package looming in Berlin today, Chancellor Angela Merkel’s government must now decide whether to back plans at a March 1-2 European Union summit to combine rescue funds and produce a potential firewall of €750 billion ($1 trillion). While the German government has yet to show its hand on a plan to combine the €250 billion remaining in the region’s temporary fund and the €500 billion permanent rescue fund that is due to come into force in July, Merkel has signalled she is open to reviewing the matter at the EU summit in Brussels.

EU Economic and Monetary Commissioner, Olli Rehn, when asked in Mexico if he expected a deal on the firewall at this week’s summit, said he anticipated a result “in the course of March”. Italy’s central banker, Ignazio Visco, echoed those sentiments.

Euro area governments have pledged about $200 billion in new money to the IMF’s lending resources. Geithner said in Mexico that he won’t go to Congress to seek a US contribution because “we don’t think that’s necessary or desirable”.

Brazil’s Finance Minister, Guido Mantega, said after meeting with his counterparts from Russia, India, China and South Africa that the BRICS group of major emerging markets will only add more funding for Europe if the region’s leaders follow “precisely to the letter” a 2010 agreement to give them a bigger say in how the IMF is run.

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