COPENHAGEN—European finance ministers urged a prompt decision on ramping up the International Monetary Fund's crisis-fighting resources, a day after they agreed to commit more funds to their own so-called firewall.
After two days of talks on efforts to enhance their response to the sovereign-debt crisis, finance ministers from the 27 member nations of the European Union and central bank governors said that despite signs of stability and easing tensions in the financial markets there shouldn't be complacency.
Danish economy minister Margrethe Vestager, who hosted the talks, said on Saturday that it is crucial that a global agreement is reached on boosting IMF's resources.
"It's important to ensure the IMF has sufficient resources to play its systemic role in the global economy," Ms. Vestager told a news conference at the end of the talks. "Yesterday's decision…is very important in this respect. What we are hoping for is an agreement in Washington."
On Friday, euro-zone finance ministers agreed to expand the currency bloc's capacity for crisis lending to €700 billion ($934 billion) by combining new funds into a permanent rescue mechanism with existing bailout loans.
But funds available for new loans will be capped at €500 billion after July 2013, when a temporary bailout mechanism will expire. The combined lending ceiling of €700 billion includes €200 billion in existing loans to Greece, Portugal and Ireland.
Euro-zone members have already committed €150 billion in fresh resources to the IMF. Contributions from other non-euro-zone EU members, including the U.K., are likely to come as part of a broader agreement.
A number of countries, including China, Brazil and Japan, have signaled they could increase their funding if Europe takes fresh steps to fortify its anticrisis measures.
Friday's agreement fell short of a €1 trillion firewall previously heralded by Group of 20 countries as a sufficient response to the crisis, with some of them, especially developing economies, arguing that Europe has again failed to do enough to help itself before seeking outside assistance.
IMF Managing Director Christine Lagarde on Friday welcomed the euro-zone decision and said it would help the IMF's efforts to raise fresh funds from its members. Ms. Lagarde wants to add $500 billion to the fund's lending power as a backstop to the euro zone's efforts to contain its debt crisis.
Sweden's Finance Minister Anders Borg also called for an agreement to boost IMF resources at a meeting of G-20 countries, the IMF and the World Bank in April.
"We need to see a strengthening of IMF resources," Mr. Borg said. "There will be a lot of debate…but there must be a decision at the G-20 and IMF annual meeting on the upscaling of the resources. We are seeing a stabilization of the crisis but it would be strengthened further if we have a broader, wider and stronger firewall."
European Central Bank Vice President Vitor Constancio, however, said the link between efforts to boost the IMF's resources and the euro-zone crisis is "overplayed."
"What is at stake regarding IMF is not directly related to Europe," Mr. Constancio said at a news conference with Ms. Vestager. "What is under discussion is an increase in the general-resources account of the IMF."
Mr. Constancio said Europe's firewall is "credible" and should serve as a safety net for the crisis.
"By definition, it's not to be necessarily used," particularly as economic reforms in EU member states have had a major effect on markets, he said.
As part of efforts to fight the effects of the prolonged sovereign-debt crisis in Europe, a number of EU member states have also moved to support the creation of a European resolution fund for failing banks.
The ECB has been pushing for the creation of an EU-wide fund to resolve the problem of winding down large cross-border institutions, rather than legislation that would oblige each member state to create their own national fund.
"It would disconnect more the banks from the sovereigns," Mr. Constancio said. He didn't provide details on which EU states were supporting the creation of a fund. He added that it is also the "easiest way of solving the problem of burden-sharing" between member states.
However, others say it will be difficult to establish a common fund amid economic instability in the EU.
"It's not a great time to do it," said an EU official. "At the very least we need national resolution funds."
The European Commission is set to propose legislation for a bank resolution scheme before the next meeting of the Group of 20 industrial and developing nations in mid-June. It presented a report to ministers at Saturday's meeting on different options for failing banks.
The EU intends to include the option of bail-ins in the rules, which would ensure bank shareholders and creditors, rather than taxpayers, pay when a bank fails. All 27 EU countries agreed that a bail-in option should be included, according to an EU official.
In order for a bail-in tool to be useful, the trigger must be made clear in the regulation, Mr. Constancio said. He added that the banking sector has come on board to the idea of bail-ins as a "useful instrument."
Ministers also discussed Saturday an EU proposal that would force issuers to rotate the credit-rating firms they use. They agreed to continue exploring how to do this.
"There are very few credit-rating agencies who actually have the capacity and muscle," Ms. Vestager said. "A number of ideas have been tabled."
Instead of rotating the firms used, one option is to require issuers to use a greater number of ratings firms on an issue.
Ms. Vestager added that future debates on taxing the financial industry will focus on alternatives to the financial-transaction tax, such as an activity tax or stamp tax on the trade of equities.
German Finance Minister Wolfgang Schäuble stressed on Saturday that he remains keen to implement a European financial-transactions tax, even if agreement on a single tax looks remote.
"The perfect solution of a financial-transactions tax at the European level probably can't be reached" because unanimity would be required, Mr. Schäuble said.
Germany presented a paper to its EU partners on the merits of introducing an EU-wide tax on share transactions that would resemble Britain's stamp duty, a person familiar with the matter said Friday.
Italian Prime Minister Mario Monti, on a state visit to Beijing, said Saturday the euro zone has made "great progress" in dealing with its sovereign-debt crisis, but that it would be dangerous to be complacent.
He said he once had concerns about Italy being dragged deeper into the crisis, but said he now believes Italy probably "won't become a new flame in the fire."
Mr. Monti described Italy as making progress in boosting tax revenues though he didn't touch on his efforts to overhaul labor laws, which would make it easier to lay off workers.
wsj.com
After two days of talks on efforts to enhance their response to the sovereign-debt crisis, finance ministers from the 27 member nations of the European Union and central bank governors said that despite signs of stability and easing tensions in the financial markets there shouldn't be complacency.
Danish economy minister Margrethe Vestager, who hosted the talks, said on Saturday that it is crucial that a global agreement is reached on boosting IMF's resources.
"It's important to ensure the IMF has sufficient resources to play its systemic role in the global economy," Ms. Vestager told a news conference at the end of the talks. "Yesterday's decision…is very important in this respect. What we are hoping for is an agreement in Washington."
On Friday, euro-zone finance ministers agreed to expand the currency bloc's capacity for crisis lending to €700 billion ($934 billion) by combining new funds into a permanent rescue mechanism with existing bailout loans.
But funds available for new loans will be capped at €500 billion after July 2013, when a temporary bailout mechanism will expire. The combined lending ceiling of €700 billion includes €200 billion in existing loans to Greece, Portugal and Ireland.
Euro-zone members have already committed €150 billion in fresh resources to the IMF. Contributions from other non-euro-zone EU members, including the U.K., are likely to come as part of a broader agreement.
A number of countries, including China, Brazil and Japan, have signaled they could increase their funding if Europe takes fresh steps to fortify its anticrisis measures.
Friday's agreement fell short of a €1 trillion firewall previously heralded by Group of 20 countries as a sufficient response to the crisis, with some of them, especially developing economies, arguing that Europe has again failed to do enough to help itself before seeking outside assistance.
IMF Managing Director Christine Lagarde on Friday welcomed the euro-zone decision and said it would help the IMF's efforts to raise fresh funds from its members. Ms. Lagarde wants to add $500 billion to the fund's lending power as a backstop to the euro zone's efforts to contain its debt crisis.
Sweden's Finance Minister Anders Borg also called for an agreement to boost IMF resources at a meeting of G-20 countries, the IMF and the World Bank in April.
"We need to see a strengthening of IMF resources," Mr. Borg said. "There will be a lot of debate…but there must be a decision at the G-20 and IMF annual meeting on the upscaling of the resources. We are seeing a stabilization of the crisis but it would be strengthened further if we have a broader, wider and stronger firewall."
European Central Bank Vice President Vitor Constancio, however, said the link between efforts to boost the IMF's resources and the euro-zone crisis is "overplayed."
"What is at stake regarding IMF is not directly related to Europe," Mr. Constancio said at a news conference with Ms. Vestager. "What is under discussion is an increase in the general-resources account of the IMF."
Mr. Constancio said Europe's firewall is "credible" and should serve as a safety net for the crisis.
"By definition, it's not to be necessarily used," particularly as economic reforms in EU member states have had a major effect on markets, he said.
As part of efforts to fight the effects of the prolonged sovereign-debt crisis in Europe, a number of EU member states have also moved to support the creation of a European resolution fund for failing banks.
The ECB has been pushing for the creation of an EU-wide fund to resolve the problem of winding down large cross-border institutions, rather than legislation that would oblige each member state to create their own national fund.
"It would disconnect more the banks from the sovereigns," Mr. Constancio said. He didn't provide details on which EU states were supporting the creation of a fund. He added that it is also the "easiest way of solving the problem of burden-sharing" between member states.
However, others say it will be difficult to establish a common fund amid economic instability in the EU.
"It's not a great time to do it," said an EU official. "At the very least we need national resolution funds."
The European Commission is set to propose legislation for a bank resolution scheme before the next meeting of the Group of 20 industrial and developing nations in mid-June. It presented a report to ministers at Saturday's meeting on different options for failing banks.
The EU intends to include the option of bail-ins in the rules, which would ensure bank shareholders and creditors, rather than taxpayers, pay when a bank fails. All 27 EU countries agreed that a bail-in option should be included, according to an EU official.
In order for a bail-in tool to be useful, the trigger must be made clear in the regulation, Mr. Constancio said. He added that the banking sector has come on board to the idea of bail-ins as a "useful instrument."
Ministers also discussed Saturday an EU proposal that would force issuers to rotate the credit-rating firms they use. They agreed to continue exploring how to do this.
"There are very few credit-rating agencies who actually have the capacity and muscle," Ms. Vestager said. "A number of ideas have been tabled."
Instead of rotating the firms used, one option is to require issuers to use a greater number of ratings firms on an issue.
Ms. Vestager added that future debates on taxing the financial industry will focus on alternatives to the financial-transaction tax, such as an activity tax or stamp tax on the trade of equities.
German Finance Minister Wolfgang Schäuble stressed on Saturday that he remains keen to implement a European financial-transactions tax, even if agreement on a single tax looks remote.
"The perfect solution of a financial-transactions tax at the European level probably can't be reached" because unanimity would be required, Mr. Schäuble said.
Germany presented a paper to its EU partners on the merits of introducing an EU-wide tax on share transactions that would resemble Britain's stamp duty, a person familiar with the matter said Friday.
Italian Prime Minister Mario Monti, on a state visit to Beijing, said Saturday the euro zone has made "great progress" in dealing with its sovereign-debt crisis, but that it would be dangerous to be complacent.
He said he once had concerns about Italy being dragged deeper into the crisis, but said he now believes Italy probably "won't become a new flame in the fire."
Mr. Monti described Italy as making progress in boosting tax revenues though he didn't touch on his efforts to overhaul labor laws, which would make it easier to lay off workers.
wsj.com
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