The International Monetary Fund's chief, Christine Lagarde, met German Chancellor Angela Merkel in Berlin
Wednesday as discord broke out in the European Union over direct aid
to stricken banks.
Officials were silent after Lagarde's hour-long meeting with Merkel. There has been speculation the IMF is urging Germany to massively write off debts owed by Greece.
Germany and two more of the EU's most fiscally conservative members were under fire over how soon the eurozone's bailout fund will be able to directly recapitalize banks in nations such as Spain.
Madrid wants eurozone loans to be channeled directly into its lenders to prevent an increase in national debt and deficit levels.
But the finance ministers of Germany, the Netherlands and Finland had on Tuesday insisted that direct recapitalizations should only be possible once a eurozone bank-supervision scheme has been created and "its effectiveness has been determined."
EU officials on Wednesday rejected the position as being out of line with that of eurozone leaders, who in June underlined that "it is imperative to break the vicious circle between banks and sovereigns" as they approved the direct recapitalizations.
"The mandate of the June summit has to be respected," European Commission spokesman Olivier Bailly told reporters in Brussels. "We want to implement (it) quickly."
Some politicians have been pushing for rapid action also to take advantage of a lull in the pressure from the financial markets, which have repeatedly reignited the eurozone's debt crisis.
The bailout fund, the 500-billion-euro (642-billion-dollar) European Stability Mechanism (ESM), is seen as key to restoring confidence in the currency area. It is set to be inaugurated on October 8, but details on its activities are still being hashed out.
Disagreements also appear to remain on whether Madrid would have to retain any bank risks on its books as part of the direct recapitalizations, with the three finance ministers saying that "legacy assets should be under the responsibility of national authorities."
EU sources, speaking on the condition of anonymity, said they were now waiting to see how other eurozone countries react.
German Finance Minister Wolfgang Schaeuble has led the way in downplaying expectations, repeatedly predicting that the eurozone bank supervisor - and thus the ESM's ability to directly recapitalize banks - will not be ready by next year.
Lagarde visited Berlin to attend Schaeuble's 70th birthday party. She and Merkel discussed "the state of the world economy," government sources said. Merkel's spokesman Steffen Seibert said earlier the agenda was the intersection of IMF and German interests.
The IMF is part of a panel drawing up a report on Athens' progress in pruning government deficits and there have been suggestions it is pressing Berlin to approve a writedown of debt, costing Greece's foreign government creditors billions of euros.
The ESM was originally meant to go into operation in July, but was delayed until the German Constitutional Court weighed in on the matter. It demanded an explicit ceiling on German liability and guarantees that the parliament in Berlin will be kept briefed.
The German government on Wednesday approved a supplement to the ESM treaty, described as an "interpretative declaration," to respect the court ruling.
The rider says, "No provision of the treaty may be interpreted as leading to payment obligations higher than the portion of the authorized capital stock corresponding to each ESM member."
It also states that other parts of the treaty "do not prevent providing comprehensive information to the national parliaments."
The text, issued as a parliamentary document, said the rider was to be jointly adopted by all the ESM nations in Brussels.
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