|US Financial Secretary Timothy Geithner, praised European nations for reducing the risk of a financial crisis [Reuters]|
Leading economies of the world have told Europe it must put up extra money to fight its debt crisis if it wants more help from the rest of the world.
Eurozone countries pledged on Sunday at a Group of 20 meetings of finance leaders in Mexico City to reassess the strength of their bailout fund in March, which could clear the way for other G20 countries to contribute more funds to the International Monetary Fund (IMF).
In a statement released after the meeting, the G20 said: “Euro area countries will reassess the strength of their support facilities in March.
“This will provide an essential input in our ongoing consideration to mobilise resources to the IMF.” The statement said.
Calls on the eurozone to boost their crisis-fighting war chest dominated the meeting, with top officials such as US Treasury Secretary Timothy Geithner saying it was essential to prevent a worldwide economic fallout.
Geithner however praised European nations for having acted to reduce risks of “catastrophic” financial crisis but said a bigger firewall was needed against future contagion.
“A durable solution requires both a sustained period of economic reform and a substantial financial firewall to support
those reforms,” said Geithner.
At a crunch two-day summit in Brussels starting on Thursday, EU leaders will be debating whether to combine their current firewall, the EFSF, with a permanent pot due to come into effect in July, which will give the17-nation zone a total fund of $1tn.
Eurozone needs other countries outside the bloc to bolster the IMF resources. But countries outside the zone, including the United States, Britain, Japan and China insisted at the G20 meeting that the eurozone should put its hand in its pocket, before asking anywhere else.
Britain’s Finance Minister George Osbourne said a trade-off had to be made.
Osbourne said “we are prepared to consider IMF resources but only once we see the colour of the eurozone money and we have not seen the colour of the eurozone money yet.”
A senior G20 official to the AFP news agency that Europe was carefully managing the sequence of steps needed to put in place all the building blocks for a total deal of a bigger eurozone fund plus more IMF funds – that would finally douse the crisis.
And while piling on the pressure on Europe to sort out its problems, the G20 statement also heaped praised on policymakers for the measures already carried out, notably in crafting a second bailout package for recession hit Greece.
“We welcome the important progress made by Europe in recent months to strengthen their fiscal positions, adopt measures to reduce financial stress…and to put Greece on a sustainable path,” said the statement.