17th October 2011
The Chancellor the Exchequer George Osborne has backed an IMF bailout fund but does this mean more UK taxpayers cash could be at risk?
This Sunday's Observer catches the dilemma well.
"Osborne's qualified support for the creation of a larger global safety net could see the UK commit further loans to the IMF, though officials said a comprehensive rescue deal would make extra demands unlikely. His remarks were designed to support moves by G20 finance ministers to arrive at a definitive solution to the crisis while appeasing rightwing Tory MPs who have voiced concerns about extending further loans to the eurozone."
But is the Chancellor trying to have his cake and eat it? Certainly, he needs to worry about the right wing of the Conservative party.
Here on the Spectator's Coffee House blog Patrick Hoskin writes: "The offer of more funding for the IMF was arresting – but it's uncertain what it will come to, or whether it will come to anything at all. Osborne himself stressed that the money could be "no substitute" for concerted action on the part of the eurozone countries, and his people are putting it about that it won't actually be needed if Europe acts adequately. But, even with these caveats, it's still the sort of offer that will put Tory backbenchers into a cold sweat."
On the Telegraph, Liam Halligan argues that there are two endgames. One complete fiscal union – he does not believe this is politically or historically possible or an orderly breakup.
He writes: "The only other durable scenario is that the euro, in as orderly fashion as possible, is broken up. That, in my view, is the "something" now required, before this grotesque monetary experiment causes not just economic stagnation, or even a global financial meltdown, but fully-blown human conflict."
"So serious is Europe's predicament, and so damaging the potential global fallout, that the US, together with China and the other reserve-rich emerging giants, are now preparing to rescue strait-jacketed eurozone banks and governments. Well, their cash should come with conditions. And "euro break-up" should be top of the list."
But what of that China rescue mentioned by Halligan?
The Sunday Times (behind paywall) suggests that China has made a dramatic secret offer to save the euro.
Using rather extraordinary langugage, it suggests a Chinese offer of billions in infrastructure investments in return for reform.
Iain Dey reports that "Sources close to the talks said China had indicated its willingness to pump tens of billions into the eurozone by buying infrastructure assets from debt-crippled states. Chinese banks would also increase their purchases of sovereign debt to prop up ailing nations.
"However, the Chinese delegation is demanding further budget cuts and structural reforms before committing large amounts of cash. The Chinese want to see evidence that Europe can cope with the rising cost of state pension and welfare payments across the continent."
The paper doesn't mention a euro break up however which doesn't seem to be in China's shopping list.
The possibility of a Chinese intervention, however slight, has been bubbling around since the start of the crisis.