Tuesday, 20 December 2011
You couldn't make it up
Well, it seems they did. The world's second or is it third largest economic world power said a few weeks ago that it was going to raise a trillion dollars, euros, or whatever, and we all laughed, especially the Chinese. It was fairly obvious that with most of the world's spare cash in the hands of despots from Jeddah, Kazakhstan to Beijing, the chances of a 13 figure cash call to bail out the cradle of democracy always looked pretty slim.
So then the Eurocrats, who if truth be known had never raised a penny from the markets, decided that they could get by for the moment on a more modest €200 billion, €50 billion of which would come from EU members who had no particular interest in the euro. Well that fell through and now we get this:
EU Member States support a substantial increase in the IMF’s resources. These resources will enhance the IMF’s capacity to fulfill its systemic responsibilities in support of its global membership, which is especially important given the ongoing economic slowdown and financial market tensions. The IMF’s involvement will be based on normal IMF conditionality.
The EU, and in particular Euro area Member States are fully aware of their special responsibility in the current circumstances. Therefore, on 9 December, euro area Member States have committed to enhanced governance to foster fiscal discipline and deeper integration in the internal market as well as stronger growth, enhanced competitiveness and social cohesion.
Ministers confirmed today that, as part of a broader international effort to improve the adequacy of IMF resources, euro area Member States will provide EUR 150 billion of additional resources through bilateral loans to the Fund’s General Resources Account.
Burden-sharing among euro area Member States will be based on quota shares resulting from the 2010 quota reform.
The Czech Republic, Denmark, Poland, and Sweden indicated their willingness to take part in the process of reinforcing IMF resources. The United Kingdom has indicated that it will define its contribution early in the new year in the framework of the G20.
For some Member States, commitments will be subject to parliamentary approval.
The EU will also work expeditiously to implement in full the 2010 quota and governance reform of the IMF.
The EU would welcome G20 members and other financially strong IMF members to support the efforts to safeguard global financial stability by contributing to the increase in IMF resources so as to fill global financing gaps.
I just love the last paragraph: Hey world, send all your money to the eurozone black hole; if you don't there'll be trouble. Every struggling business should cut and paste it mutatis mutandisinto all of their letters to their banks.
The upshot is that the Germans have agreed to put up about €40 billion, which is barely more than the €38.5 billion that Italy and Spain hae agreed to put up - to bail out Italy and Spain amongst others. If the rest of the world would like to chip in €960 billion to sustain their export driven economy, they would be very grateful.