The International Monetary Fund is seeking to more than double its war chest by raising $600 billion in new resources to help countries deal with the fallout of the euro zone debt crisis, but the United States and other countries are throwing up roadblocks.
The United States and Canada said on Wednesday Europe must put up more of its own money to solve its sovereign debt crisis, clouding prospects that G20 talks in Mexico this week can lay the ground for a deal on bolstering IMF resources.
"We continue to believe that the IMF can play an important role in Europe, but only as a supplement to Europe's own efforts," a US Treasury spokesperson said. "The IMF cannot substitute for a robust euro area firewall."
Group of 20 deputy officials are set to discuss boosting IMF resources, which will need leaders' signoff, at a meeting in Mexico City on Thursday and Friday ahead of a late February finance ministers' meeting of advanced and development nations.
The IMF currently has a lending capacity of about $380 billion and estimates there are about $1 trillion in "uncovered" financing needs over the next two years.
"Based on staff's estimate of global potential financing needs of about $1 trillion in the coming years, the fund would aim to raise up to $500 billion in additional lending resources. This total includes the recent European commitment of about $200 billion in increased fund resources," an IMF spokesman said.
"At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations," he added.
IMF sources who were present at an IMF board meeting on the issue on Tuesday told Reuters the IMF was seeking to raise up to$600 billion, with $100 billion needed as a "protection buffer."
There would be a $1 trillion global financing gap over the next two years if global economic conditions worsened considerably, the sources added.
The US repeated that it would not contribute more resources to the IMF.
"We have told our international partners that we have no intention to seek additional resources for the IMF," a Treasury spokeswoman said.
With a strained budget at home, some US congressional Republicans have threatened to yank $100 billion in US money to the IMF if the funds are used to bail out euro zone countries. The White House is unlikely to want to take on the issue as President Barack Obama seeks reelection this year.
On foreign exchange markets, the reports of plans for increased IMF lending capacity helped boost the euro.
Euro zone nations have already promised to inject an extra 150 billion euros into the IMF, which is included in the total estimate. G20 officials in Mexico for the meeting of deputy finance ministers and central bank officials said there was still resistance in some quarters to increase funding.
"Many countries want the Europeans to move ahead with tougher and clearer measures, which at this moment translates to more resources to its stability fund," said a senior Brazilian government source attending the meeting.
Bank of Canada Governor Mark Carney said it was not clear European governments had done everything necessary to make sure they could fund themselves at sustainable interest rates over the next few years.
"If it makes sense to enhance the resources of the IMF, the principal focus, it would seem, should be on dealing with fallout of the European crisis for innocent bystanders," he told a news briefing in Ottawa.
Another source connected to the process said that as well as Canada and the United States, Japan and Korea were also pressing for discussions first about Europe's contribution to the crisis and for it to agree on additional measures. European nations were arguing that they have done enough and were calling for more IMF resources now.
"If, with the parallel discussion, we can achieve extra measures from the Europeans and afterwards agree on promises of additional resources for the IMF from non-European countries in the G20, I think it would be a good result," the source said.
