Like a never ending game of “Ring-Around-the-Rosie“, European leaders switch from one poor funding idea, to another, to another, around in an endless circle of dead-end propositions then back where they started. The “posie” is now back in the IMF’s pocket.

Kate Greenaway’s Mother Goose illustration

Finance Ministers Seek IMF Funding Deal

Remember the idea to leverage up the EFSF with a “loan” from the IMF? It’s magically back, in spite of the fact the EFSF idea itself appears dead.

Bloomberg reports Europe Finance Ministers Seek Crisis IMF Funding Deal as Confidence Wanes

European finance ministers today will seek to meet a self-imposed deadline for drawing additional aid to the debt crisis and to form new budget rules as investor confidence that a comprehensive solution is achievable wanes.

Euro-area finance ministers will hold a conference call at 3:30 p.m. Brussels time to discuss 200 billion euros ($261 billion) in additional funding through the International Monetary Fund and the mechanics of a so-called fiscal compact that was negotiated at a Dec. 9 European Union summit, according to two people familiar with the planning.

Euro-area officials aim to meet their deadline for today to arrange the IMF loans. The package entails about 150 billion euros pledged by euro-area central banks and another 50 billion euros to be contributed by non-euro EU states. The euro-area ministers will be joined in the call by their EU counterparts to thrash out measures including the decision-making process of the bloc’s permanent bailout fund, the European Stability Mechanism, one of the people said.

ECB Divisions

The treaty, to be hammered out by late January and signed in early March, will take effect once ratified by nine of the 17 euro-area countries. EU states outside the euro will join as they ratify, with the U.K. alone so far in refusing to sign up.

Departing ECB Executive Board Member Juergen Stark revealed divisions in the central bank on measures to ease market turmoil with bond purchases. He told German magazine WirtschaftsWoche in an interview that his decision to leave the ECB derived from his disappointment over “how this monetary union has evolved.” He criticized the bond purchases.

ECB President Mario Draghi has signaled that the Frankfurt- based bank won’t step up its bond-purchase program, leaving euro-area governments on their own to resolve the crisis.

Pet Lies

The paragraph above in red by Bloomberg is completely misleading if not blatantly inaccurate.

  1. As I pointed out with thanks to reader Janne from Finland, Hell Will Freeze Over Before Finland Signs Treaty.
  2. Another Look at the UK “In Isolation”: Update on Sweden (from Sweden)
  3. Crumbling of Comprehensive Solution No. 4: Crumbling of Comprehensive Solution No. 4; Treaty “Legally Doubtful”; Cracks and Splinters Everywhere; Repeated “Pet Lies” by EC President Van Rompuy
  4. Sarkozy is going to lose the next French election and Socialist challenger François Hollande Would Renegotiate EU Deal.

EU demands £25bn lifeline from the UK

The Telegraph reports EU demands £25bn lifeline from the UK

European finance ministers will aim to agree a new €200 billion (£167.7 billion) loan to the International Monetary Fund as part of a deal to save the single currency.

Three quarters of the money is expected to come from eurozone members, but Britain will also be asked to provide funds.

Figures suggest European Union officials expect British taxpayers to be the second largest contributor. The Prime Minister has repeatedly promised not to provide any extra funding for the IMF for the specific purpose of saving the euro and Britain is already liable for £12 billion of loans and guarantees to Ireland, Greece and Portugal.

Earlier this month, EU countries set today as the deadline to raise up to €200  billion in new loans for the IMF to deal with the eurozone crisis.

Finance ministers will hold a conference call in an attempt to reach agreement on the war chest.

An EU official said Britain was still expected to contribute €30.9 billion (£25.9 billion), leaving the country as the second biggest contributor to the new IMF fund behind Germany and equal with France.

Cameron Should Tell EU to Shove It

Prime Minister David Cameron is to tell the EU where to shove it. That would be the proper response in any case, but it’s especially appropriate now given how Germany and France conspired against the UK in the Merkozy treaty.

That is something French President Nicolas Sarkozy should have thought about before opening snubbing Cameron.

Furthermore, if the UK does not pony up, I strongly suspect they will not be alone. Finally, any nation that does pony up on the basis it is a “loan” should have full expectation the word is really “gift” as defaults are coming.

Mike “Mish” Shedlock
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