EU agrees to boost IMF funding

Leaders of the European Union have agreed to almost double funding for the International Monetary Fund, increase availability of emergency funding for members outside the euro zone, and on how to spend the bloc's budget surplus, Czech Prime Minister Mirek Topolanek said after the EU meeting in Brussels on Friday.

Topolanek, whose country currently chairs the EU, chaired a two-day meeting of leaders from the union's 27 members that ended Friday. In his closing press conference, Topolanek said they had agreed to provide 75 billion euros in new funds to the IMF, double the emergency fund to 50 billion euros, and spend 5 billion euros on energy and broadband projects.

"We've achieved three goals: five, 50 and 75," Topolanek said.

Speaking alongside Topolanek, European Commission president Jose Manuel Barroso said the EU believes that both regulatory reform and fiscal stimulus are required to halt the global economic downturn. "We need reform of financial market regulation as well as stimulus to spur economic recovery," he said, adding that restoring growth would not be possible otherwise.

The EU draft said the EU would propose to April's G20 summit in London to "double IMF resources so that the Fund can help its members swiftly and flexibly if they experience balance of payment difficulties". However, it made no reference to the size of the possible EU contribution to any doubling.

In what will be seen as a response to China's wish for a stronger voice in the IMF, the draft also called for IMF reform so "that it reflects more adequately relative economic weights in the world economy".

Responding to market concerns that the global economic and financial crisis will hit central and eastern European members more than those in western Europe, the leaders said they would help EU countries in need, boosting a 25 billion euro crisis fund if necessary.

"The Community stands ready to provide balance of payments support for eligible member states that need it and, to this end, will keep the ceiling for the Union's support facility for balance-of-payments assistance under review," the draft said.

There was no direct reference to a proposal by the European Commission for the ceiling of the fund - which has already been availed of by Latvia and Hungary - to be doubled to 50 billion euros. Diplomats said the proposal won broad support among leaders at the summit.

EU leaders also agreed that apart from the cash already pledged for bank guarantees and recapitalisation they will have to spend more on dealing with toxic assets on banks' balance sheets to restore confidence in the sector and unclog credit flow.

They said the clean-up of banks' balance sheets should be done in line with European Commission guidelines from February and EU competition laws.

Reflecting European calls for tighter regulation to avoid a repeat of the financial crisis, the draft urged "appropriate regulation and oversight of all financial markets, products and participants that may present a systemic risk".

Unions want more
"I think the EU should be more responsive to the US call for more economic stimulus," Monks, head of the European Trade Union Confederation (ETUC), told reporters in Brussels.

He was speaking before the opening of a two-day EU summit dominated by the crisis, which has already led to widespread plant closures, soaring unemployment and growing labour unrest.

The French and German leaders, along with the European Commission, are reluctant to boost the EU's existing 200 billion euro stimulus package for 2009 and 2010. They argue that Europe's "automatic stabilisers" – including high social welfare payments such as unemployment benefit - add at least another 200 billion euros to that package.

The Czech Republic will host an EU summit focusing on jobs in May. The emphasis will be on improving the mobility and skills of workers, technical innovation and reducing administrative burdens. 

European Commission President Jose Manuel Barroso has dismissed simple comparisons between the EU and US economies. "Let's concentrate on implementation," he said. "You can't compare the situation of an unemployed GM worker in Detroit with that of a Saab worker in Sweden."

The jobless rate across the 27-member EU in January was 7.6 per cent. Big marches are planned in Madrid, Brussels, Berlin and Prague to demand more jobs.