By TIM SHIPMAN Last updated at 1:06 AM on 23rd November 2011 Plans to funnel British taxpayers’ cash to Italy’s stricken economy were unveiled yesterday as the Euro continued to teeter on the edge of disaster. The International Monetary Fund (IMF) set up a new ‘credit line’ to channel money to troubled economies - and officials said it could be used to bail out the government in Rome. The move could see billions of pounds being poured into Italian coffers with very few strings attached – with Britain required to pay 4.5per cent of the costs. Cash crisis: The IMF, headed by Christine Lagarde (left), is setting up a 'credit line' which could pump billions into the Italian economy. But with Britain's money at stake, it will pile pressure on David Cameron to stand up for the nation's interests The IMF decision will pile pressure on David Cameron to do more to protect British national interests from the Eurozone crisis. In a separate move yesterday, both German Chancellor Angela Merkel and French President Nicolas Sarkozy said they are working on plans to introduce changes to EU treaties to impose central controls over fiscal policy in countries in the single currency. ‘We are soon going to make proposals on modifying the treaties to avoid countries diverging in budgetary, economic and fiscal matters,’ Mr Sarkozy said. Mrs Merkel again rejected Mr Cameron’s demands for the European Central Bank to act as lender of last resort. And she made clear that countries which spend too much and ‘break the rules’ of Euro membership should have policies dictated to them – meaning by Berlin. The timing is awkward for the Prime Minister, who last night faced demands that he call a referendum to let Britain have its say on the plans for a Eurozone fiscal union. Up against it: Mr Cameron has already been left red-faced over the Eurozone crisis after German Chancellor Angela Merkel (right) rejected his calls for the European Central Bank to act as lender of last resort Tory MP Mark Pritchard said Mr Cameron’s plans to demand control of employment laws in return for signing off on a treaty would not be enough. ‘Concessions to Britain cannot be a substitute for a referendum. The proposed treaty changes are significant, not minor, and concessions are no longer satisfactory. The British people need to be empowered and British national interests defended.’ Mr Cameron and Chancellor George Osborne have repeatedly said that money from the IMF should not be used as a substitute for the Eurozone sorting out its own problems. But yesterday the IMF stepped in after weeks of failure by Germany and France to get a grip on the crisis and provide the ‘big bazooka’ backup that the single currency needs. Under the plans, countries facing ‘short-term liquidity needs’ would be able to borrow up to five times their own contribution to the IMF for six months. Working together: Mrs Merkel (left) and French President Nicolas Sarkozy are trying to hatch plans to introduce changes to EU treaties which will create central controls over fiscal policy in countries in the single currency And while it had been thought Italy might not be allowed to take money from the fund, IMF sources said that it would be able to draw on the cash. ‘Italy is under pressure to join up,’ one said. ‘Italy will be pre-approved for the credit line.’ Treasury sources said the new credit line would be paid for out of funds already pledged to the IMF and that the Precautionary and Liquidity Line funding facility would simply replace an existing Precautionary Credit Line fund that was already in place. IMF boss Christine Lagarde also said the changes would lead to more money being made available. ‘The reform enhances the Fund’s ability to provide financing for crisis prevention and resolution,’ she said. ‘This is another step toward creating an effective global financial safety net.’ IMF officials are set to travel to Italy to examine the country’s finances. The country stumbled towards crisis again yesterday as the interest rate on Italian government debt rose to 6.92per cent. An interest rate of 7 per cent on government bonds is seen as unsustainable by the financial markets and led to bailouts in Greece, Ireland and Portugal.IMF 'credit line' will funnel British taxpayers' cash into stricken Italian economy
Wednesday, 23 November 2011
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