Whilst Britain is struggling to clear its deficit and reduce its borrowing, fellow ministers have grilled the Chancellor over the decision to hand out the UK’s cash, to help the limping Euro.
However, Mr Osborne insisted that the money would be paid back in full and said that it was in the interests of the UK to ensure the IMF was strong and robust.
Critics have suggested that the loan, which pushes the UK’s commitment to the IMF to £40 billion, will simply be used to ‘prop up’ the euro and the countries which are struggling within the single currency. And they have also claimed that the Chancellor deliberately limited the UK’s contribution, because agreeing to provide a higher sum would have meant having to obtain approval from the House of Commons.
MPs from all parties have been quick to condemn the loan which many view as a ‘back door’ way to provide financial support to the euro, of which Britain is not part and has no obligation to assist. For the first time, Mr Osborne was forced to concede that some of the funds could end up being channelled into debt-stricken EU countries such as Greece, but insisted it would not be used to directly support the single currency.
Other wealthy nations globally, such as Canada and the US, have declined to inject cash into the IMF, as they are reluctant to play any role in the eurozone saga.
A former Chancellor for Labour, Alistair Darling, was an unexpected voice of support, agreeing that providing the loan was the right course of action. However, he highlighted the fact that the IMF was having to plead for more cash because some of the nations within the euro were failing to conduct themselves in a fit and proper manner.
Mr Osborne told MPs that the UK had a patriotic duty, as a ‘proud, open, trading nation,’ to provide the help and announced that Britain would not ‘turn its back on the world.’ He said that refusing to contribute to the IMF would be a ‘betrayal’ of both the ‘country’s interest and identity.’
However, the Chancellor came under fire from many of his own backbenchers for the loan. John Redwood, an ex-Cabinet minister, said that the IMF cash should not be made available to any nation which was part of the single currency. Wellingborough MP, Peter Bone, described it as ‘bonkers’ to pour ‘taxpayers money into supporting the failed euro.’ Mr Bone also suggested that the only way the huge economies such as Spain, Italy, Greece and Portugal could be restored to former financial integrity, would be to scrap the euro and bring back their national currencies.
However, amid all the criticism, the Treasury was quick to point out that the IMF had not failed to repay any of its loans in the 67 years it had been borrowing money. And the Chancellor also added that the UK would receive an additional return, by way of interest payments.
Mr Osborne insisted that failing to provide the loan could put the UK’s economic recovery in jeopardy. He accused Labour opposition as being ‘opportunistic’ and said they had in the past agreed to support the IMF financially. The Chancellor told Radio 4, that the IMF was a major factor in helping to ensure global stability and without their influence, jobs in the UK could, ultimately, be put at risk.
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