Germany’s Bundesbank is prepared to provide as much as 45 billion euros ($59 billion) for a loan to the International Monetary Fund as long as nations outside the euro area also contribute, President Jens Weidmann said.
“The Bundesbank has stated its readiness to provide up to 45 billion euros as long as there is a fair distribution of the burden amongst the IMF members,” Weidmann said at an event in Frankfurt last night. His comments were embargoed until noon today. “If these conditions are not fulfilled, then we can’t agree to a loan to the IMF.”
At a summit earlier this month, European leaders agreed to lend the IMF as much as 200 billion euros so that it has the capacity to aid debt-strapped euro-area nations if needed. The plan calls for euro-area central banks to contribute up to 150 billion euros and European Union nations outside the currency bloc to chip in 50 billion euros. The U.S. has said it won’t participate.
“There has to be a fair distribution of the burden,” Weidmann said. “If large members, for example the USA, were to say ‘we’re not taking part,’ then from our point of view it is problematic.”
Weidmann said the funds must also go into the IMF’s general resources and not a special fund for Europe.
“In no circumstances can a circumvention of the prohibition on monetary state financing take place,” he said. “It cannot be the intention that euro-area central banks finance euro-area governments. We are not talking about a loan here for the euro area.”
Turning to monetary policy, Weidmann said he assumes euro- area inflation will drop below 2 percent next year and that the ECB has “sufficient instruments to react.”
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