The G-20 nations are conditioning additional money for the International Monetary Fund on the European Union first increasing its financial stabilisation funds to ease concerns about the Euro zone debt crisis, officials said on Sunday.

Officials participating in a meeting of G-20 nations' finance ministers and central bank heads said an EU decision to add to the estimated $675 million in firewall funds already committed to the effort would be essential before the rest of world considers contributing to the stabilisation measures.

“There is broad agreement that the IMF cannot substitute for the absence of a stronger European firewall and that the IMF cannot move forward without more clarity on Europe's own plans,” U.S. Treasury Secretary Timothy Geithner said following the close of the meeting, noting the U.S. would not be making any increased contribution.

The weekend talks mainly focused on stability for the Euro zone, where debt and economic problems have threatened to destabilise global financial markets.

Though no specific amount in firewall funds was discussed, Geithner said the funds “have to be large ... my sense is that they (Europeans) understand that.” Other officials said the added funds must be enough to calm market concerns and should be available to countries before they fully carry out promised fiscal reforms.

While the United States, Brazil and the Organisation for Economic Cooperation and Development had already publicly urged an increase, a senior G-20 official who spoke on condition she not be quoted by name said the consensus that the EU must act was much broader, including big potential lender countries like China and Japan. They feel the IMF can play a back-up role, but the EU's own fund must be the first line of defence, the official said.

It appears Germany's reluctance to further fund EU stabilisation funds may be the sticking point, largely because the issue is a sensitive one in German domestic politics. Germany is the EU's strongest economy and would probably be the biggest contributor, and the German Parliament must still approve the current round of support efforts for debt-plagued Greece.

An essential input

At a news conference, Mexican Treasury Secretary Jose Antonio Meade noted the Euro-zone countries are to assess their stabilisation efforts at a March meeting and said the results of that assessment, and possible changes in the size of the firewall funds, would “be fundamental” to how G-20 nations decide on increasing funding for the IMF.

Mexico's central bank head, Agustin Carstens, said the EU decision would be an “essential input” for IMF funding decisions. Geithner noted that “the G-20 is committed to making sure that the IMF has the resources it needs to help its members deal with the risks from Europe.”

Geithner also said he had “a series of encouraging conversations with countries planning to significantly reduce imports from Iran,” to reinforce sanctions aimed at discouraging Iran's nuclear programme.

Turning to the U.S. economy, Geithner said, “this is an important year for financial reform in the United States.”

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