Talks on the size of loans from euro zone national central banks to the International Monetary Fund are starting at a technical level after euro zone finance ministers gave the green light to explore the idea last Tuesday, officials said on Saturday.
Euro zone finance ministers agreed on Tuesday to rapidly explore boosting the resources of the IMF through bilateral loans, so that the Fund can match the new firepower of the euro zone bailout fund, which is being leveraged.
No amount has been discussed at the political level, one senior euro zone official involved in the talks said.
Discussions are only starting at the technical level, so right now any number is pure speculation, the official said.
The euro zone wants to boost IMF resources so that the fund could provide a credible backstop should the euro zone's third and fourth largest economies of Italy and Spain be cut off from the markets and need a multi-year emergency loan programme.
Euro zone officials have offered various guesses on the possible size of loans to the IMF, ranging from significantly less than 100 billion euros to several hundred billion euros.
Work on this is still going on. It is premature to talk about numbers, a second euro zone official familiar with the talks said. Two other euro zone officials confirmed no amounts have been discussed yet.
The euro zone's bailout fund, the European Financial Stability Facility (EFSF), has uncommitted resources of around 250 billion euros, while the IMF's lending capacity now is around $380 billion (283 billion euros).
Depending on investor interest in the two leveraging options approved on Tuesday for the EFSF by euro zone ministers, the fund could multiply its firepower several times -- although it is expected to be short of the four times leverage envisaged six weeks ago because of rapidly deteriorating market conditions.
If IMF resources were to be increased to adequately match the EFSF, as the Eurogroup chairman Jean-Claude Juncker said after euro zone ministers met on Tuesday, the aim could be to multiply the funds several times as well.
The EFSF alone could not handle a Spain or Italy bailout now. Even if it joined forces with the IMF at the IMF's current lending capacity, it might still not be enough. The only institution with adequate firepower is the European Central Bank.
Because the ECB is not a member of the IMF, but euro zone countries are, it would be through national central banks of the euro zone that the increase of resources to the IMF would take place, euro zone officials said.
The money could be either put in the IMF's general revenue account or a special trust fund for the euro zone only. The advantage of the general account would be that all IMF members would be liable for the repayment of the loans.
The special trust fund, on the other hand, would be able to intervene on the secondary markets, for example.
Euro zone officials hope that emerging market economies like China, Russia, Brazil and Saudi Arabia would participate with their own cash in the resource increase.
It remains to be seen how exactly that could be done, but of course the more participation the better, a third euro zone official said.
Euro zone officials said that a decision to increase IMF resources, while already heralded by an agreement at the G20 summit in Cannes to explore it, could be made at the next meeting of G20 finance ministers in Mexico in February.
(Additional reporting by Ilona Wissenbach; Editing by Mark Heinrich)