THE UK looks set to commit billions of extra pounds to the International Monetary Fund after the body confirmed plans to raise an additional $500bn to shore up the world’s ailing economies.
The Government was facing warnings of a backbench rebellion last night as Conservatives expressed anger at the prospect of UK taxpayers being asked to underwrite lending to eurozone countries unable to cope with their debts.
The UK is currently liable for 4.5 per cent of the IMF’s existing $400bn lending capacity, leading to speculation the planned increase would mean an additional British liability of about £17bn.
Treasury sources said it would be misleading to put a figure on any possible contribution, however, stressing that talks were only at a preliminary stage.
The announcement came as the World Bank warned the global economy is on the edge of a new financial crisis, potentially even deeper and more damaging than that which followed the collapse of Lehman Brothers in 2008.
The bank slashed global growth forecasts and said there is now a risk of a “much broader freezing up of capital markets, and a global crisis similar in magnitude to the Lehman crisis”.
In Greece, talks resumed with private creditors in the hope of sealing the debt relief deal needed to avoid a default.
The heads of the Institute of International Finance, a global banking association, returned after negotiations stalled last week.
“Talks with private creditors are without a doubt at a very sensitive stage,” Greek Finance Minister Evangelos Venizelos said.
More broadly, fears are growing among Tory MPs that the IMF intends to use its greater lending capacity to extend the eurozone bail out.
The UK has already approved about £40bn to support the IMF, of which about £30bn is committed. Any further request going beyond the £10bn “headroom” available to Chancellor George Osborne would have to be approved by MPs.
Downing Street confirmed Mr Osborne was ready to put any “decent” request from the IMF to MPs, but Prime Minister David Cameron made clear any increase in UK funding would have to be designed to assist struggling countries, and not simply to bail out the euro.
Speaking in London after talks with Italian leader Mario Monti, Mr Cameron said: “We believe the IMF must always lend to countries, not to currencies. We would only act if that was with others, not just as part of a eurozone measure.”
However, Tory backbencher Peter Bone said Ministers would face a “good deal of trouble” in any vote on increasing the IMF contribution, adding: “My view, and I think of a number of other Conservative MPs, is that enough is enough.”
Mr Monti, who is set to hold talks on fiscal discipline within the eurozone with German chancellor Angela Merkel and French president Nicolas Sarkozy tomorrow, was challenged at the London press conference over why British taxpayers should find the money to help Italy deal with the debts run up by his predecessor, Silvio Berlusconi.
He replied: “To my knowledge, my country has not cost a penny to the UK so far as I know.
n German Chancellor Angela Merkel will give the opening speech at the World Economic Forum in Davos, Switzerland, next week.
Top of the agenda at the elite annual gathering of business and government leaders will be the debt crisis.
About 40 heads of state and 18 of the world’s central bankers are expected to attend.