Federal Reserve (FED) could lend money to IMF, along with the 17 euro area central banks, to support countries with large debts in Europe, according to German newspaper Die Welt. Euro area central banks could pay at least 100 billion euros in a special fund that would be used for programs for countries that have problems to keep their debts under control, said sources close to negotiations, quoted by Die Welt. “Other central banks, such as the Fed are prepared to fund some of the costs”, according to publication.
U.S. Treasury Secretary, Timothy Geithner, could discuss the idea during his visit to Europe this week. Discussions on the size of loans from euro area central banks start at the technical level, after the region’s finance ministers have given their consent. The idea is that the IMF have the same capacity as the European Financial Stability Facility to support the euro area countries with problems.
A source said there was no specific amount discussed at the political level. Leaders of the euro area want an increase of the IMF resources so that the institution can provide credible support to Spain and Italy, if they will need an urgent loan program. Geithner will meet, starting Tuesday, several European leaders and will ask them to take decisive steps at the summit this weekend. A U.S. Treasury official said on Friday that the United States does not intend to give IMF bilateral loans, considering that the Fund has adequate resources.