Fed may give loans to IMF to help euro zone

The Federal Reserve, along with the 17 euro zone national central banks, may help provide the International Monetary Fund (IMF) with funds that could be used to aid debt-ridden states, a German newspaper said.

Die Welt cited sources close to the negotiations as saying the euro zone central banks could pay at least ^100 billion ($134.2 billion) into a special fund that could be used for programs for nations struggling to control their debts.

“Also other central banks, for example the US Federal Reserve, are apparently prepared to finance a part of the costs,” the paper said in an advance copy of an article to appear on Monday.

US Treasury Secretary Timothy Geithner may discuss the idea in the coming weeks when he visits Europe, the paper said.

Officials had said on Saturday that talks on the size of loans from euro zone central banks were starting at a technical level after finance ministers from the currency union gave the go-ahead to explore the idea.

The idea is for the IMF to be able to match the new firepower of the euro zone bailout fund, which is being leveraged.

One senior euro zone official has said that no amount had been discussed at the political level.

The euro zone wants to boost the IMF’s resources so the fund could provide a credible backstop if Spain and Italy were to need an emergency loan program.

Geithner is to hold talks with several European leaders in the coming week and is set to urge them to take decisive action at an EU summit aimed at preventing the euro zone debt crisis spiraling out of control.

A Treasury official said on Friday that the United States was not planning to make bilateral loans to the IMF and the lender’s resources were adequate.