Germany blocks G-20 plan for SDRs to fund EFSF arm

[Roland99]

Source: MarketWatch

Germany has blocked a plan under which the Group of 20 industrial and developing nations would have injected funds into the European Union's bailout vehicle through an issue of special drawing rights, the national currency of the International Monetary Fund, an official with knowledge of the discussions told Dow Jones Newswires Friday.

The G-20 heads of government meeting has been dominated by the debt crisis in Europe, and leaders had discussed the option of allowing the IMF to issue SDRs, which would then be injected into a special-purpose vehicle affiliated to the European Financial Stability Facility, thus giving the EFSF greater means to buy up the debt of euro-zone members in trouble.

Germany resisted the idea because it considered the plan to be tantamount to monetizing sovereign debt with the central bank reserves of IMF members. Germany has consistently opposed any initiative to have the IMF create additional liquidity at the global level, saying that this must remain the prerogative of central banks.

Various other means of mobilizing official funds to help stem the euro-zone debt crisis are still under discussion at the summit in Cannes, the person said

Read more: http://www.marketwatch.com/story/germany-blocks-g-20-plan-for-sdrs-to-fund-efsf-arm-2011-11-04

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No IMF, EFSF Participation In European Bailout: Merkel Says G20 Fails To Reach Agreement On IMF Resources, Nobody Wants Any Piece Of EFSF
http://www.zerohedge.com/news/no-imf-participation-european-bailout-merkel-says-g20-fails-reach-agreement-imf-resources

Yesterday we reported that the latest deus ex machina in the endless European bailout was to proceed with IMF monetization and failing that, just a narrower US-funded bailout of Europe. That ain't happening.

German Chancellor Merkel says the G20 failed to agree on IMF resources
German Chancellor Merkel says will make sure that the IMF has sufficient resources, but also new instruments

And it gets worse:

German Chancellor Merkel says hardly any countries in G20 have said they will participate in the EFSF

Which means we are back to the old and now expired fallback deus exes: China and the magical, wonderful and totally unfunded EFSF. No wonder the EURUSD is dropping on the news, as for the BTP-Bunds spread, well, following the Merkel announcement that Italy has to come under IMF monitoring,

[FarCenter]

1. Germany is right to block this

It is bad enough for European countries to be indebted in the Euro.

Being indebted in the SDR would be potentially disastrous, since the European governments would not control the inflation/deflation of the SDR quasi-currency.