Eurozone pledges €150 billion to IMF

@CNNMoneyInvest December 19, 2011: 6:04 PM ET
Finance ministers say the money will strengthen the global lender's resources. But the amount falls short of the ?200 billion European politicians announced earlier this month.

Finance ministers say the money will strengthen the global lender's resources. But the amount falls short of the ?200 billion European politicians announced earlier this month.

NEW YORK (CNNMoney) -- European finance ministers announced plans for euro area governments to funnel €150 billion into the International Monetary Fund, according to statement issued Monday following a lengthy conference call.

The goal is to reinforce a financial "firewall" to prevent Italy and Spain from being burned by the crisis that engulfed Greece. But the amount announced Monday falls short of the €200 billion target European Union leaders agreed to earlier this month.

The additional money will enhance the IMF's capacity to support member states "based on normal IMF conditionality," the statement said. The IMF typically lends to nations in need under certain conditions, such as requiring governments to enact budget reforms.

While the move could ease some fears in the market, analysts say much more money is needed to protect larger eurozone nations.

The funds will be provided in the form of loans to the IMF's general resource account. The loans will be in addition to existing IMF commitments.

For some euro area nations, the commitments will be subject to Parliamentary approval, suggesting the plan could run into some stiff political headwinds.

ECB's Draghi: Euro breakup is 'morbid speculation'

In particular, the lower house of Parliament in Germany, known as the Bundestag, has been opposed to backing additional bailout funds in the past.

The contributions are based on an existing IMF quota system. Among the 17 euro area nations, Germany and France contribute nearly half of the €150 billion. Italy, which is potentially the main beneficiary of the new funds, will chip in over €23 billion.

The United Kingdom, which does not use the euro, apparently declined to contribute additional funds to the IMF. The U.K. will "define its contribution" to the anti-crisis effort early next year "in the framework of the G20," according to the statement.

In addition to the 17 euro area nations, four European countries that do not use the euro will contribute to the IMF. The nations are the Czech Republic, Denmark, Poland and Sweden.

The European Union would "welcome" the support of Group of 20 nations and other IMF members in its efforts to "safeguard global financial stability," the statement said.

But the United States, the IMF's largest backer, has said repeatedly that the fund has sufficient resources to meet all of its objectives. To top of page

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