In spite of what you hear by the nanny-zone Eurocrats, the rifts keep getting wider and the odds the Merkozy agreement gets tossed to the dogs rises every day.
Today the UK put a nail in the coffin of more money to the IMF and Sweden may do so as well. Please consider Euro zone IMF lending plan in danger as UK declines
Pressure Cooker Will Soon Blow Sky HighEuropean finance ministers looked unlikely to reach a target of boosting IMF resources by 200 billion euros to ward off the debt crisis on Monday, after Britain said it would not take part in a plan aimed specifically at helping the euro zone.
In a three-hour conference call, ministers also assessed plans for tighter euro zone fiscal rules - a new 'fiscal compact' - that policymakers hope will insulate the 17-country currency zone against a repeat of the two-year debt crisis.
Treasury sources said Britain had made it clear on the call it would not participate in the plan to increase IMF resources by up to 200 billion euros, with 150 billion of coming from euro zone central banks.
While Sweden said it would take part, with conditions, Britain's decision to stay on the sidelines means it is unlikely the headline goal will be reached. Ministers had set an informal deadline of Monday to arrive at the 200 billion figure, which was agreed by EU leaders at a summit on December 8-9.
Speaking during testimony to the European Parliament, ECB President Mario Draghi praised EU efforts to forge a new 'fiscal compact' as a solid base for responding to the crisis, and called the euro an "irreversible" project.
Finland's opposition, if not overcome, could scupper efforts to bring the ESM into force in July 2012, a year earlier than planned, to step up crisis-fighting efforts.
While EU leaders agreed at their last summit on the desire to boost IMF resources, there are doubts about whether the scheme will work, with not just Britain unenthusiastic, but the United States and Germany's Bundesbank too.
"Washington cannot make bilateral loans available to the IMF without Congress approving it," German Finance Minister Wolfgang Schaeuble told German radio. "There's no chance of that and the American government has always made that clear."
Market response to measures agreed at the December summit has been cool, mainly because of the reluctance of the ECB to step up bond purchases and declare its readiness to do so.
As a result, ratings agency Fitch concluded on Friday that a 'comprehensive solution' to the crisis was technically and politically beyond reach. It warned that six euro zone economies, including Italy and Spain, could be hit with credit downgrades in the near future.
Standard & Poor's has said it could soon downgrade nearly all the euro zone's 17 members.
A declaration from the ECB that it would buy unlimited amounts of euro zone bonds for as long as necessary would immediately calm markets, but would probably break EU law and would relax pressure on politicians to reform their economies.
"The ECB simply can't and won't say that, and it's very unreasonable to even expect it," one euro zone official said.
Instead, the bank was likely to keep quietly buying enough Spanish and Italian bonds to keep both countries on the market but with financing costs sufficiently high to keep pressure on their lawmakers to pursue tough reforms.
"This is the most expensive approach, also not likely to work in the longer run, but still it is the only one possible," the euro zone official said.
Euro zone leaders agreed on December 9 to write into national constitutions a rule that budgets have to be balanced or in surplus in structural terms. If they are not, automatic corrective measures would follow.
Such rules would sharply limit government borrowing, bring down debt and, euro zone politicians hope, help restore market trust in the sustainability of public finances.
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