A lot has been made of the UK Chancellor’s decision to agree for further funding to go to the IMF (should it be asked for) with the UK’s cupboard already very bare. Tory MPs are apparently planning a rebellion to demonstrate their objection to such a measure.
Last week’s Prime Minister’s Questions saw the UK’s longest-serving MP, Sir Peter Tapsell, come out and suggest that any further funding for the IMF which could be used as a bailout for the Eurozone would be effectively “providing a subsidy to Germany”.
This may well be the case in so much that any IMF subsidy would mean that Germany may not have to dip into its own pockets in order to help the periphery; something that looks as unlikely as ever after Chancellor Merkel’s speech to the Davos summit last week.
George Osborne has tried to quell the Tory uprising by making sure that a certain number of conditions are met before the UK decides to stump up the cash. At a private lunch held by members of the British business world the Chancellor revealed those terms. It was proposed that fund would insist on conditions with any loans; that other G20 countries would participate; that the fund would not establish vehicles specific to the Eurozone; and that any new funds could not be used as a substitute for internal Eurozone action.
The fourth term on this list is the most interesting. It means that without a decent level of funding through the joint EFSF/ESM support mechanisms, then further cash will not be forthcoming from the UK. The ball is being put firmly back in the European’s court.
However, Osborne is able to count on some unlikely allies in the form of the Labour party. The hatred between Ed Balls and George Osborne is fantastic to watch at times, and it seems that they could disagree on almost anything. But the Labour party has signalled that it would back further funding for the IMF as long as similar rules are put in place to protect Britain’s investment – i.e. that Europe also stumps up some money as well.
The vote on further IMF funding may be brought front and centre following the “victory” (if you can call it that) in hounding the RBS CEO, Stephen Hester, into surrendering his bonus payment for the past financial year. We may not be paying our bankers any extra money this, but that will not stop us paying Europe it seems.
