UK ready to contribute extra resources to IMF, says George Osborne - The Guardian

The chancellor, George Osborne, has told MPs Britain stands ready to contribute extra resources to the IMF after the bailout package agreed at the emergency EU summit in Brussels.

However, Osborne sought to reassure backbench MPs the UK would not contribute directly to the EU bailout mechanism or to the IMF-administered special purpose vehicle being discussed by the French president, Nicholas Sarkozy.

Treasury officials admit extra resources for the IMF would make it easier for the organisation to lend to indebted countries inside the eurozone, but added that there was no immediate proposal for such an increase in IMF resources. The IMF is already lending to Greece, Ireland and Portugal.

"Supporting countries that cannot help themselves is what the IMF exists to do," Osborne said. "There may well be a case for further increasing the resources to the IMF to keep pace with the size of the global economy. And Britain stands ready to consider the case for further resources and contribute with other countries if necessary."

Discussions on the issue are likely to start at the G20 summit in France in a fortnight.

The chancellor told MPs that Britain would need to discuss with its European partners limited treaty changes to allow an inner euro group of the 17 countries in the single currency to operate more closely together, including holding two summits a year of heads of state.

He insisted Britain's interests would have to be protected in such discussions, but faced a barrage of Eurosceptic demands that Britain will not contribute to the bailout and will consider loosening its ties with the EU.

"No one pretends that sorting this out in a satisfactory way is going to be easy, but it is a necessity," he said. "This government will protect Britain's interests as the discussions on a possible limited treaty change begin".

Osborne also reiterated the guarantee in law that the government will hold a referendum if further powers and competencies are transferred to Brussels. In practice, it is not yet clear whether the treaty changes would involve a loss of UK sovereignty.

The concern is more that Britain is marginalised from key discussions that shift to the eurozone.

Osborne said David Cameron had already held talks with the Swedish and the Polish prime ministers on how to prevent the eurozone countries from caucusing ahead of meetings of all 27 EU nations and, in effect, bouncing the outer group.

But he endorsed the concept of greater fiscal union within the eurozone: "If the solution is to last, then members of the euro area need to address the logic of monetary union by pursuing greater fiscal integration within the eurozone whilst at the same time protecting Britain's interests."

He also repeated that the coalition agreement allowed the government to seek to rebalance powers between the UK and the EU in this parliament, even if it did not allow for full-scale renegotiation.

With the stock markets rising in response to the summit deal, Osborne stressed that British banks were properly capitalised and praised his fellow EU states on the progress made. He highlighted the agreement for a 50% write-off on Greek debt as "a very good number" and at the higher end of private Treasury expectations prior to the summit. But he warned that, unless details were put in place soon, uncertainty would return.

"We need to see how the new firewall is going to work in practice," he said. "We've got to see the details of this. Until those details are in place, this will remain unresolved and the instability may potentially return.

"If the detail is in place, we should then be able to make an assessment of whether it's calmed the markets and whether it's improved the UK growth position."