December 3, 2011
A European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.
At a Nov. 29 meeting attended by European Central Bank President Mario Draghi, euro-area finance ministers gave the go- ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage. The need for a new crisis-containment tool emerged as the effort to boost the 440 billion-euro rescue fund to 1 trillion euros fell short.
Under the proposal, national central banks would recycle funds through the IMF, potentially to underwrite precautionary lending programs for Italy or Spain, the two countries judged to be the most vulnerable now, the people said.
“We’re looking for a maximum reinforcement with the IMF and the central bank,” Belgian Finance Minister Didier Reynders told reporters Nov. 30.
No fewer than four “comprehensive” rescue packages over 19 months have failed to arrest the crisis, fueling speculation that a currency designed to last forever might break up unless European leaders forge a more united economy. Central bank loans may be linked to an adoption of tougher budget policing by governments and tighter economic ties.
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