December 16, 2011
European leaders last week agreed to outfit the International Monetary Fund with 200 billion euros to assist countries in the common currency zone. But Germany's central bank has its doubts: Some heavyweight countries are balking, and it also increases risks for German taxpayers.
The shock waves from last week's European Union summit in Brussels were difficult to ignore, with Great Britain emerging as isolated and the rest of the bloc promising to take steps toward fiscal union.
A closer look at the fine print, however, revealed that the 27 heads of state and government really only emerged from the summit with one concrete pledge aimed at dampening the most immediate effects of the debt crisis currently battering Europe. They vowed to loan up to €200 billion ($260 billion) to the International Monetary Fund so that the IMF could step up its aid to European countries in need.
Now, though, with Germany's central bank showing increasing doubts about the fund and others demonstrating an unwillingness to participate, even that measure may now be in doubt.
Bundesbank head Jens Weidmann has insisted that before Germany sends its €45 billion share to the IMF, it needs assurances that other fund members outside of Europe are also willing to help out. Russia indicated its willingness to play along on Thursday. There are indications, however, that the United States will not help out. According to Bloomberg, Federal Reserve Chairman Ben Bernanke told Senate Republicans on Wednesday that the Fed would not devote more money to the IMF. US President Barack Obama has also said that the IMF has sufficient resources.
Canada too has shown no interest in the IMF plan. And Japan has insisted that Europe do more on its own.
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