Canada heads into weekend meetings of the G20 determined to resist any talk of sending new money to the IMF that would go to Europe’s bailout fund.
Though some in the European Union are pushing for a larger role for the International Monetary Fund in aiding the euro zone, Canada will side with G20 nations including the U.S., U.K. and Japan that are also cool to the idea.
Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty head to Mexico City later this week for the first set of G20 meetings under Mexico’s presidency. This year’s G20 leaders summit will take place in June.
According to a senior Finance official who briefed reporters in advance of this weekend’s meetings, Canada’s position will be to encourage Europe to use its own funds in building up a sufficiently-sized “firewall” that will reassure markets that the E.U. is prepared to support its struggling members if necessary.
The official said Canada does not intend to speculate about whether there are any conditions under which Canada would boost its IMF funding. However the official did note that Canada committed last year that if the IMF does need extra cash in the future for its regular duties, Canada will be there.
On other issues, Canada is expected to raise its concern over the U.S. Volcker rule. The new U.S. banking legislation is drawing sharp concern from outside the U.S. as it is seen as over-reaching into the affairs of non-U.S. banks.
George Osborne and Jun Azumi, the finance ministers of the U.K. and Japan, wrote in Thursday’s Financial Times that the Volcker rule as currently written would make it harder for countries to issue and distribute debt.
“At such a vulnerable time in the sovereign debt markets, it would be the wrong prescription,” they wrote.
The G20 discussions in Mexico are also scheduled to discuss commodity and energy markets.
In recent years, one of the G20’s primary concerns has been the lack of fluctuation of the Chinese currency. However the Canadian official noted that there has been some gradual movement on China’s part and the G20’s focus has now moved to monitoring the commitments made to be accountable and transparent in these areas.
Later Thursday, Mr. Flaherty spoke to reporters and elaborated on Canada’s position heading in to the G20 talks.
“There are two issues there. One is what is the appropriate level and that figure of $1-trillion (the proposed size of E.U. loan guarantees and other support in U.S. funds) is often used and looks like it’s in the ballpark for the right figure,” said Mr. Flaherty, in rejecting the case for outside support.
“The European countries involved here are among the wealthiest countries in the world. The IMF membership includes many of the poorest countries in the world, so I think we’re asking the wrong question right now. The right question is have the European countries stepped up to the plate fully with their resources. That’s Canada’s position and we will be advocating it this weekend.”