20 Apr 2012

Britain commits extra £10bn to International Monetary Fund

Chancellor George Osborne

Chancellor George Osborne has committed Britain to an extra £10bn loan to the International Monetary Fund amid rising tensions in the world economy.

The loan will not be subject to further parliamentary approval. The loan will form part of an $400bn extraordinary fundraising from the IMF, announced by managing director Christine Lagarde, which has been sought in the aftermath of the euro crisis.

The chancellor is adamant that this is not a further back-door bailout of the eurozone. He said that the fundraising “met strict conditions, that it’s a loan and not a gift within the ceiling already set by parliament.” He said it met his four conditions for extra money: that the eurozone had boosted its own firewall, that the funds were not earmarked for the euro, that it was part of an international effort, and that conventional IMF conditions would be attached.

There will be no vote in parliament on the loan, which is sure to lead to backbench Conservative concerns. The opposition voted against a boost to IMF resources in parliament last year. George Osborne stressed that the loan was “broadly the same as in 2009″ when the Labour government bosted IMF resources after the Lehman Brothers crisis, and stressed the funds were “broadly in line with quota size and contributions from non-euro countries.Australia, Mexico and Singapore also announced considerable extra loans to the IMF. Other emerging economies such as China signalled support, in principle, but are not expected to indicate a number here today.

Many of the emerging economies feel their voice and vote share at the organisation that bails out governments, need to be further increased.The funding is unusual because such increases are conventionally announced by the g7 pr by the IMFC committee. This arrangement has been agreed because the US and other advanced nations will not contribute to this extra funding.
The Chancellor reiterated that no country has ever lost money making loans to the IMF, and that the funds would not have any impact on UK public spending or deficits.

Other G20 officials have suggested that the magnitude of the extra IMF firepower is only really for the eurozone, for Spain and Italy, and that there may be extra “non trivial” risks. The official EU position that the crisis is abating is rather difficult to square with the need for huge increases in bailout facilities.

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7 reader comments

  1. howmisound.... says:

    Incredible nonsense…this man is clearly Robin Hood but within a role reversal? Not sure what’s next – in any case I thought the ‘Coalition’ government was not going to play ball any-more with Europe, the IMF and so on since ‘the dear leader’ boro Dav, or PM-DC took back the ‘ball’ not so long ago when he stopped talking with the French…and they kicked him off the top table?

    Is it that the the food on the lower table is not so sweet or is it a realisation that in the end and after WWII the Germans get Europe anyway if they do not return the ball?

  2. ballymunboy says:

    Lending money is generally very lucrative. The terms of the loan are the determining factor on the profits to be made. What return is the UK taxpayer going to see on his investment in this IMF loan? Why isn’t Osborne telling us? Surely it’s something to boast about?

    The involvement of the UK taxpayer in the Eurozone Crisis has the effect of intertwining the interests of the City bankers and the British government.

    The clout of the government will now be used as a beating stick to enforce repayment of the larger debts those private bankers claim to be owed by the Eurozone.

    In other words, the UK taxpayer is being sacrificed as the bankers’ cannon fodder. Just as with the Icelandic crisis

    In that manufactured crisis, Alistair Darling promised to reimburse all savers’ losses from the engineered collapse of the Icelandic banking industry

    In truth, Darling was dancing to the tune of private financiers who were only too eager to loan the money needed to compensate our savers

    Heavily indebted, Darling was then duty-bound to pursue the Icelandic state for his loan repayments, on behalf of his private banking-puppetmasters who actually issued the loans to reimburse…

  3. Andrew Dundas says:

    It is now abundantly clear that the difficulties in British financial markets and some banks is International. Moreover, that every country in the OECD is affected by this contagion.
    In short, our crisis is NOT because of a British Government failing.
    Every government and almost every bank and commentator (and I!) agreed with the 2004 advice of Alan Greenspan (Chair of the US central bank) that no financial crisis was predicted by the unusual movement of Bond prices and LIBOR interest rates. Greenspan declared that no special measures were needed. He confessed all this to the US Senate in 2009. But we all had agreed with him in 2004!!
    We also now know that the Lib-Dem allegation in 2009 that Spain’s banking regulations were far superior to ours was tosh. That applies to each and every country’s bank regulations, the Basel committee and the ECB too. We were ALL found wanting – including Channel Four.
    So. Next time anyone says ‘the mess THEY got us into’, just remind them that that ‘anyone’ is implicated too.

  4. Zed Jessob says:

    Maybe the extra £10 BILLION is more needed here, in the UK than with the IMF …. We are taxed more and told to tighten our belts instead…

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