IMF: $650 billion isn't enough for the European bailout fund

European finance ministers agreed to move up the launch of a permanent bailout fund by a year, but the fund is still too small, according to the IMF.

Eurozone finance ministers have agreed to install a new, permanent bailout fund a year earlier than planned,?a sign that the continent still struggles to find the right cure for its sovereign debt crisis.?

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At a meeting in Brussels last night, the Eurogroup decided to launch the European Stability Mechanism (ESM) and provide it with a volume of ?500 billion ($650 billion).?

Criticism came quickly. The International Monetary Fund (IMF) said the fund should be boosted to ?750 billion ($976 billion). Europe needs ?higher firewalls,? said IMF Managing Director Christine Lagarde in a speech at the German Council on Foreign Relations in Berlin on Monday.

The German government promptly rejected the suggestion. Chancellor Angela Merkel said her country was doing everything needed to save the euro, but that a boosting of the rescue fund is unnecessary at this point of time. Germany supplies ?22 billion ($28.5 billion) in cash and ?168 billion ($218.5 billion) in guarantees to the ESM. Germany has shouldered the largest share of this bailout funding so far.

The backdrop to the current argument is the ongoing debate about the priorities in solving the euro debt crisis. Germany insists on budgetary discipline as the main tool. Before Ms. Merkel commits to spending more money on bailing out ailing economies, she wants to see implementation of the fiscal union she pushed through at the last EU summit in December that would give Brussels more control over individual countries' budgets. By March, member states are supposed to have ratified the union, subscribing to the German idea of austerity.?

Critics of Merkel?s position say that thrift is not the answer, nor does Europe have time until March. Mrs. Lagarde, who on Sunday met with Merkel and Finance Minister Wolfgang Sch?uble, was clearly not satisfied by the outcome of that meeting.

Source: http://rss.csmonitor.com/~r/feeds/csm/~3/LkpLKt7cebQ/IMF-650-billion-isn-t-enough-for-the-European-bailout-fund

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