Osborne: Eurozone Must Show Colour Of Money

27th January 2012, 22:24

George Osborne has reinforced his message to the eurozone that Britain is "ready" to help boost IMF resources to bail out struggling economies - but only if strict criteria are met.

The Chancellor was speaking at the World Economic Forum in Davos, Switzerland, where he appeared on a panel alongside IMF director Christine Lagarde.

Taking a somewhat conciliatory tone, he joked that it was "probably the only time in my life I intend to speak for the Eurozone", saying that the "courage" of single currency members "should be saluted".

He went on to say that resolving the Greek crisis was "fundamental to the eurozone", warning that there was a "danger that the tale wags the dog in this crisis".

While he said that there was "scope" to increase funds to the IMF, he avoided going into any detail, saying instead that there was a "need to restore confidence in multilateral organisations".

In a further sign that the Government's line on Europe may be softening, the Chancellor said he is prepared to go back to Parliament to get MPs to approve further UK contributions to the IMF, and warned they should think carefully before attempting to block such a motion.

But speaking in Davos on Friday at an event organised by the Confederation of British Industry, Mr Osborne took a somewhat harder line, saying eurozone countries must show "the colour of their money" in shoring up the single currency before any IMF funds are given to members.

Britain is expected to be asked to increase its contributions to the IMF as it seeks to raise an additional $500bn (£320bn) - which could mean an additional liability of around £17bn.

Mr Osborne said the eurozone economy "has sufficient resources to put the credibility of the firewall beyond doubt".

"All that is required is the political agreement to make those resources available on a credible timescale," he said.

"At the same time the global community - through the IMF - should always be ready to support individual countries that get into trouble and need temporary financing while they adjust.

"The UK is a long-standing supporter of the IMF - indeed we were instrumental in its creation - and we stand ready to play our part in that global effort if certain conditions are met."

Those included a stipulation that there were "no new vehicles or funds specific to the eurozone", full IMF conditionality and the participation of other G20 countries.

"And crucially, IMF resources to support individual countries cannot be a substitute for further credible steps by the eurozone to support their currency," he added.

"In other words, the world needs to see the colour of their money before it contributes any more."

Several senior Tory MPs are angry at suggestions the Government will meet the IMF's request as they fear the additional contributions will be used to prop up the eurozone.

Parliament has previously approved around £40bn in support for the IMF, of which about £30bn has already been committed.

Any new request going beyond the £10bn "headroom" still available to Mr Osborne would require a fresh vote by MPs.

(c) Sky News 2012