Germany’s Bundesbank can provide as much as 45 billion euros ($59 billion) for a loan to the International Monetary Fund only if 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.”
The comments suggest a stronger stance from the Bundesbank on the need for outside help than European leaders indicated at a summit earlier this month, when they merely invited “parallel contributions” from other nations. The Dec. 9 summit agreed on additional resources of 200 billion euros for the IMF from the euro area and other European Union members. 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 U.S.A., 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.”
The summit agreement called for EU members to “consider and confirm” by Dec. 19 the additional funds “to ensure that the IMF has adequate resources to deal with the crisis.”
“We are looking forward to parallel contributions from the international community,” the leaders said in their statement agreed in Brussels.
Prime Minister David Cameron’s spokesman said the U.K. did not agree to increase its contribution to the IMF at the summit.
“This report is untrue,” Steve Field told journalists in London after The Daily Telegraph reported today that the U.K.’s contribution might rise by 30 billion pounds ($46 billion).
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.”