EU backs stronger IMF and eastern aid lifeline

The European Union yesterday pledged more than $100 billion in new loans to the International Monetary Fund to bail out countries in the global recession and urged the G20 economic powers to help double its funding.

EU leaders also agreed at a summit to double to €50 billion a crisis fund which can be used by struggling member states which do not use the euro currency and has already been tapped by Latvia and Hungary. But as expected, they ignored US pressure to raise the size of their economic stimulus plans and said the priority for now was to exercise budgetary restraint and tighten supervision of financial markets, products and centres.

"Europe's entire political leadership has chosen to seek ambitious results at the London summit," French President Nicolas Sarkozy told reporters.

Making clear the 27-nation bloc had gone through two days of difficult discussions at a summit that had little impact on financial markets, he said: "This is a clear position. It wasn't at all sure beforehand that we would get there".

The IMF has been stretched by making loans to countries such as Ukraine and Pakistan during the worst financial crisis since the 1930s and has asked for the funds it can use for bailouts to be increased to $500 billion.

British Prime Minister Gordon Brown, who hosts a summit of the Group of Twenty leading and emerging economies on April 2, said the new IMF loans were only for emergencies. Diplomats said the EU hoped to persuade China, Saudi Arabia and others to help.

A German parliamentarian caused a stir by saying the European Central Bank had a plan to prevent member states that use the euro going bankrupt, with Ireland and Greece the top candidates for aid. But EU leaders denied this.