The UK government has said that it is preparing to contribute more money to the International Monetary Fund (IMF) in an effort to help struggling countries, including indebted eurozone countries.
This means that British taxpayers could be helping nations such as Greece, Italy, or Spain, who are saddled with record amounts of debt.
Prime Minister David Cameron is set to meet with G20 leaders in France to discuss the debt crisis in Europe, which has seen markets across the globe react violently in as the crisis unfolded over the past few months.
However, he has ruled out contributing directly to the European Financial Stability Fund, or the bailout fund.
Chancellor George Osborne made a statement to ministers about increasing the IMF fund to keep in line with the size of the global economy. However, he has said that the UK is only prepared to contribute to IMF funds that are available to all struggling countries.
While British taxpayer money will not be reserved for the eurozone, it still may end up helping some of the bloc’s struggling countries.
Currently, the British money makes up £29 billion of the IMF’s £600 billion lending capacity. Around £5 billion of this is held in the IMF’s fund, with provisions to take up to £29.4 billion from the Treasury in some cases.
The government also has stressed that no country has ever lost money that it has loaned to the IMF.
Ending the crisis
The eurozone crisis can unfold with a few eventualities, according to the government: the deal struck by European leaders gets back on track after a Greek national vote on the bailout, Greece leaves the eurozone, or the IMF fund is boosted for struggling economies. It is clear that the government is prepared to affect the final of these three outcomes.
However, because of Greek Prime Minster George Papandreou’s surprise referendum on the bailout package, the country’s next bailout tranche will be withheld until Greece’s further participation in the euro is certain.
Mr. Cameron has stated that “putting meat on the bones” of the eurozone debt plan is urgent to show that Europe is on track to solving the crisis.
The urgency for a clear plan is felt even more now that the G20 summit in Cannes nears, as French president Nicholas Sarkozy plans to persuade nations like China to contribute to the newly expanded 1 trillion euro European Financial Stability Fund.