There was, however, growing support amongst the Group of 20 industrial and developing nations for a controversial European-backed tax on financial transactions, which will return to the spotlight in next week's ECOFIN meeting in Brussels.
G20 discussed options, but no accord
Eurozone leaders meeting on 26-27 October gave the green light to leverage the rescue fund, or European Financial Stability Facility (EFSF), Europe by creating a "special investment vehicle" designed to lure money from China, Brazil and Middle Eastern countries. A definitive agreement on the EFSF's full size will, however, not be finalised until late November.
The EFSF was initially valued at €440 billion, currently contains approximately €250 billion, and EU leaders agreed last week to attempts to leverage this sum to between €1trillion and €1.25 trillion.
This sum will need commitments from Chinese and other IMF members, which remained a key unresolved detail following last week’s Brussels summit.
Three options for how the IMF could help eurozone governments finance debt came under focus at the G20 meeting Cannes.
- The first called for the IMF to create special drawing rights that would be handed over to eurozone governments and other countries facing market pressure. Those governments could then exchange them for euros or other currencies at central banks around the world.
- Under the second option that was discussed, nations would put money in a trust fund that would be administered by the IMF. The fund would then be used for lending to troubled governments, without specifically earmarking Europe.
- The third option called for governments to prevent $280 billion (€203.5 billion) of IMF resources from being returned to government shareholders next year. That money was supposed to be a temporary boost of IMF resources to deal with the crisis, but the US opposed the move at the summit.
Following the summit, German Chancellor Angela Merkel said that leaders had agreed that IMF members would be tapped for their interest once the EFSF had established clearer guidelines. "There are hardly any countries that have said already they will cooperate with the EFSF. Several have made inquiries and I think it will depend on the guidelines," she said.
Commission President José Manuel Barroso said that the summit had seen “a clear message of support… for the commitment of the European countries in face of this unprecedented situation that we have been facing.”
He said he hoped the G20 would give a mandate to finance ministers to bolster IMF resources through “special drawing rights, or other structures such as a trust fund or an administrative account within the IMF funded by members or other donors. This means we are increasing the global firewall against contagion.”
Argentina, Brazil and South Africa join call for FTT
The potential for introducing a new financial transactions tax – already proposed by the European Commission – met with growing support at Cannes, with Argentina, Brazil and South Africa joining EU countries in backing the proposal. The African Union has also backed the tax as a way to raise money for development and humanitarian assistance.
The tax has gained support in the EU from governments and taxpayers who bore the brunt of expensive bank bailouts. London, with over half of the EU's financial transaction business, remains resistant, however, saying it will only back the tax if other global financial centres also adopt it. There is also strong resistance in the United States.
The issue will be debated by EU finance ministers meeting in Brussels for the ECOFIN on 8 November.
French President Nicolas Sarkozy described the tax as “possible, financially indispensable and morally inarguable”, and afterward the summit said he hoped it could be achieved in 2012.
Barroso said: "It makes sense to have this kind of financial transaction tax not only to ask the financial sector to give a fair contribution to the common good, but also to use part of this financial transaction tax as a way to support development."
