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EU urges doubling of IMF capital

German Chancellor Angela Merkel (C) talks to French President Nicolas Sarkozy (R) and French Finance Minister Christine Lagarde at the summit in Brussels (20 March 2009)
The Brussels meeting is taking place ahead of April's G20 summit in London

EU leaders have urged the G20 leading economies to double the money available to the International Monetary Fund to help countries in financial difficulty.

Leaders meeting in Brussels said they would provide up to 75bn euros ($102bn; £71bn) in loans in an effort to boost the IMF's capital to $500bn (£344bn).

They also doubled to 50bn euros (£47bn; $68bn) the amount of emergency funding available to help non-eurozone members.

But the bloc resisted US calls to spend even more to revive national economies.

They said they wanted first to gauge the effects of the 200bn-euro ($274bn; £188bn) stimulus package they have been implementing, and that the focus should be on reforming the global financial system.

A call to others to "avoid all form of protectionist measures" was overshadowed by an announcement that the French carmaker, Renault, would move a production line from Slovenia back to France.

France last month agreed to give Renault and Peugeot Citroen each 3bn euros ($4bn; £2.8bn) in loans if they kept French plants open.

The European Commission has demanded clarification about the plan.

'Message of solidarity'

The two-day Brussels meeting took place as the world's biggest economies prepare for the G20 summit in London on 2 April.

Mirek Topolanek and Jose Manuel Barroso (19 March 2009)
Europe is showing it's up to the challenge
Jose Manuel Barroso
European Commission President

At the end of the talks, EU leaders called on other members of the G20 to double the IMF's resources, saying that co-ordinating international action is critical to "a swift return to sustainable economic growth".

Czech Prime Minister Mirek Topolanek, whose country currently holds the EU's rotating presidency, said the bloc was prepared to pay a third of the increased funds for the institution.

"If there is a need to help countries which are particularly hit by the crisis, then there is the possibility to help them - 75 billion [euros] is the figure for a voluntary loan to the IMF to act better in the crisis," he told a news conference.

Mr Topolanek also said they would double to 50bn euros the emergency balance of payments aid available to members outside the 16-nation eurozone who were "particularly hit by the crisis".

Hungary and Latvia have already received nearly 10bn euros (£9bn). Romania is also seeking a bail-out, and Lithuania is set to follow suit.

European Commission President Jose Manuel Barroso said the 25bn euros currently available would cover existing requests, but that the EU wanted to "show that we would be able to respond to these possible cases".

Mr Barroso said the summit was delivering "a message of confidence and solidarity," adding: "Europe is showing it's up to the challenge."

'Deadly idea'

The EU also ruled out an extra stimulus package, despite calls from Washington for one, instead stressing the need for greater oversight.

"The G20 summit is about getting a better regulation of the international capital markets, and there is a need for that," Prime Minister Topolanek said.

He had said on Thursday that the leaders were "unanimous in their views" that they were "going to be prudent" with stimulus plans.

G20 LONDON SUMMIT
World leaders will meet next month in London to discuss measures to tackle the downturn. See our in-depth guide to the G20 summit.
The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the US and the EU.

Mr Topolanek warned that any more deficit spending was "a deadly idea", adding that EU leaders were awaiting the results of the 200bn-euro package for 2009 and 2010 agreed in December.

The European Commission says that if member states' increases in welfare spending are included, the measures total 400bn euros - equivalent to 3.3% of the bloc's gross domestic product.

Mr Topolanek also said agreement had been reached on projects to be included in a 5bn-euro ($6.9bn; £4.7bn) package of previously unspent EU budget funds, ending a three-month-long dispute over their allocation.

Much of that money will be spent on upgrading energy infrastructure - part of a plan to avoid any repetition of the winter gas dispute between Russia and Ukraine that left much of Central and Eastern Europe with severe shortages.

The Nabucco pipeline project, which would bring gas from Central Asia to Central Europe, bypassing Russia, will receive 200m euros ($274m; £188m). Germany had opposed giving it public money.

Mr Topolanek said EU leaders had not come up with concrete proposals on aid for green projects in developing countries because "other global partners have not yet come up with their proposals".



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