German, French and British finance ministers said Monday that Europe should plug most of the shortfall and increase its overall donation to $175 billion. On Wednesday they will ask smaller EU nations to join them. Germany is now prepared to give $35.95 billion (25.03 billion euros), France is now pledging a total of ¤18.45 billion ($26.5 billion) and Britain will up its share by an extra $11 billion to $26 billion. Germany's finance minister Peer Steinbrueck and his French colleague Christine Lagarde called Monday in letter to other EU nations for Europe to “lead by example.” They linked this to discussions over voting weight in the IMF where European nations are expected to give up some say to emerging economies such as Brazil, India and China.
“Maintaining a significant share would ensure that EU member states' views are adequately represented,” they said. The EU's 27 nations hold separate seats at the IMF and can vote as they like. Together they share 32 percent of IMF votes and have so far resisted any suggestion that they take one European seat. Reform may see mid-sized EU countries such as Italy, Spain and the Netherlands lose some say.
Steinbrueck and Lagarde said in the letter that the funding boost would represent around 35 percent of the IMF's new lending facility. The IMF can extend credit to governments that urgently need money to cover the gap between tax revenue and public spending. The sudden economic downturn has caused Ukraine, Nigeria, Pakistan, Sri Lanka, Mexico, Iceland, Serbia, Belarus and two EU nations -- Hungary and Latvia -- to seek IMF help. EU finance ministers will also talk about financial reforms they want other parts of the world to sign up to.
In another letter to the US, China, India and others, Steinbrueck said Europeans wanted to see G-20 nations draft rules in parallel with the European Union to regulate credit rating agencies, credit derivatives, hedge funds and other financial market players. EU rules “will only be fully effective if they apply globally with parallel initiatives especially in the G-20 countries,” Steinbrueck said, calling on them to “use the window of opportunity blown open by the crisis to stabilize the world's financial system on a lasting basis.” France is also keen for the G-20 to restrict bonus payments to bank executives or spread them out over several years to reflect longer-term risks. It is also suggesting that bonuses could be capped as a percentage of investment banking revenue or that they could be taxed to fund guarantees for bank deposits.
