Some G20 countries soften stance on Europe: sources

Fri Jan 27, 2012 7:10pm EST
 
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By Francesca Landini and Luis Rojas

MILAN/MEXICO CITY (Reuters) - Some of the world's biggest economies want to move quickly on a cash injection for the International Monetary Fund to help rescue the euro zone, but hardliners may still scupper an early deal to boost the fund's war chest, G20 sources said on Friday.

Officials from the Group of 20 leading economies are engaged in what one called a 'chicken and egg' game as they work toward a possible deal on boosting the IMF's firepower at a meeting of the bloc's finance ministers and central bank governors in Mexico City in one month's time.

Emerging market powers Brazil and China are among the countries keen to pursue the two-track plan pushed by the current G20 president Mexico to work on additional IMF funding simultaneously with extra steps from Europe, one G20 official told Reuters, rather than insisting on European action upfront.

"There was a much more cooperative sentiment between G20 countries than in recent meetings," said the official, referring last week's discussions between G20 deputies in Mexico City.

"Some emerging countries are more open to consider contributions to increase IMF resources in parallel with euro zone efforts, so they are open to make commitments to increase IMF resources in the next few weeks," the source added.

Mexican central bank governor Agustin Carstens said a consensus was building on boosting IMF resources to help European countries and others that need aid.

But the February 25-26 meeting deadline may prove ambitious, given the United States' insistence that Europe boost its own crisis shield further before any pledges to the IMF - which estimates it needs $600 billion more to limit the fallout.

"Our view is that the only way Europe is going to be successful in holding this together is for them to bring a stronger firewall," U.S. Treasury Secretary Timothy Geithner said at the World Economic Forum in Davos, Switzerland.   Continued...