The International Monetary Fund appeared to be inching toward a deal on increasing its financial firepower on Tuesday, with Japan, Sweden and Denmark committing a total of $77 billion to help contain the euro zone's debt crisis.
The pledges were made ahead of meetings of global finance chiefs in Washington this week that will focus on additional funds for the IMF, an issue that has taken on fresh urgency, given a jump in borrowing costs in Spain and Italy this week.
Their renewed borrowing woes have reignited fears that the euro-zone crisis is about to flare again.
While a deal may not be fully fleshed out by the time the meetings wrap up on Saturday, it is possible that the G20 developed and emerging nations could agree on the amount of funds needed and leave it to a leaders' summit in Mexico in June to hammer out details.
In an interview with Reuters, German Finance Minister Wolfgang Schaeuble played down concerns that Spain could be the next euro-zone country to seek a bailout. He expressed optimism that the G20 will increase IMF resources by $400 billion by the time the meetings conclude.
U.S. Treasury Under Secretary Lael Brainard said Europe must commit to do whatever it takes to address its debt problems, but should be careful to avoid a downward spiral of austerity and recession. She reiterated that Washington has no intention to throw more money in the IMF's pot.
A number of emerging market economies, including China, Brazil and Russia, are also being cautious about ponying up money, although the funds would be designated to help countries outside of Europe. These economies want firm commitments that any new resources will be accompanied by more voting power in the global lender.
They have been frustrated with the slow pace of governance reforms. The United States is holding up approval of vote reforms agreed in 2010 that would make China the IMF's third-largest shareholder and boost voting shares for Brazil and India. Negotiations have already begun on the next stage of voting reform, which is expected to be completed in 2013.
Brainard said the United States would seek congressional approval for the quota reform at an appropriate time.
WILL OTHERS FOLLOW?
On Tuesday, Japan pledged $60 billion to the IMF, becoming the first non-European nation to commit to strengthen the fund's financial arsenal. Sweden said it was ready to immediately commit $10 billion and increase the amount to $14.7 billion later, while Denmark said it would give $7 billion. Norway pledged $9.6 billion in December.
Together, they set the stage for decisive progress to be made by the time of the spring meeting of our global membership later this week, IMF Managing Director Christine Lagarde said in a statement.
In an interview with Italy's main financial newspaper Il Sole 24 Ore, Lagarde said she hoped to reach the critical mass of more than $400 billion, although she said sealing a deal might take longer.
The IMF has scaled back estimates for its funding needs in recent weeks, saying that the risks to the global economy it foresaw last year had not materialized. Still, on Tuesday it warned that the world economy faced an uneasy calm and was still fragile.
In January, the IMF said it needed an additional $500 billion to lend and another $100 billion for reserves to comfortably guard against risks posted by the euro-zone crisis.
Euro-zone countries have already committed to provide 150 billion euros ($200 billion) and they hope other European Union countries, notably Britain, will pledge up to 50 billion euros ($65 billion).
G20 sources said China and Saudi Arabia were expected to commit funds, with smaller amounts coming from Brazil, Russia, Mexico and Poland.
The United States, heading into a presidential election in November and facing internal political opposition to putting up money for wealthy European nations, has said it will not participate in the fundraising effort.
Brainard said the United States believed the IMF had very adequate core resources to deal with global challenges.
Canada has also said it would not contribute.
Japanese Finance Minister Jun Azumi said Tokyo's contribution, which will be formally announced at the G20 meeting, would encourage other countries to follow suit.
Azumi said he consulted with Chinese Vice Premier Wang Qishan on Monday and that there were no gaps between the two countries on IMF funding.
Analysts said Japan's commitment may be motivated partly by fears that an unruly euro-zone crisis could lead to a surge in safe-haven demand for the yen.
It remains to be seen how much the other major economies, which are less exposed to the euro zone, will contribute, economic research firm Capital Economics said on Tuesday.
Germany's Schaeuble said it would be wrong for countries to withhold new funds in an effort to secure a deal on quota reform, saying this would amount to going back on a promise.
That's what we've agreed, and I assume it will happen, Schaeuble said. There are some voices that apparently want to set new conditions. That would go against what we've agreed. ($1 = 0.7610 euros)
(Additional reporting by Johan Sennero in Stockholm, Tetsushi Kajimoto in Tokyo, and Gernot Heller and Annika Breidthardt in Berlin; Editing by James Dalgleish and Jan Paschal)