By ELISABETH MALKIN and ANNIE LOWREYPublished: February 25, 2012
At the center of the dispute is the reluctance of cash-rich economies like China and Japan to contribute new money to the International Monetary Fund without a commitment from European countries to expand their own stabilization fund first. The United States has said that it will not contribute new money to the I.M.F.
The issue of that “European firewall” is dominating the discussions here among finance ministers and the heads of central banks of the leading economies.
Treasury Secretary Timothy F. Geithner said Saturday that although European countries had made progress over the past few months in averting a “catastrophic financial failure,” more work was needed to “put in place a stronger, more credible firewall.”
The I.M.F. has announced plans to raise an additional $500 billion in lending resources, to help in Europe and elsewhere. But fund-raising has stalled, as the world waits to gauge the reaction from European officials.
Germany, for one, has indicated that it does not think the firewall should be made bigger at this point. There is concern that additional money might ease pressure on the more indebted countries in the euro zone, such as Spain and Italy, to pull back from commitments to undertake structural changes that will prove painful for their citizens. At the same time, any additional contribution by Germany would need public support at home.
With any resolution unlikely this weekend, countries are expected to continue talks on the firewall at the annual spring I.M.F. meeting in Washington.
The meetings come at the end of a week in which Europe and the I.M.F. approved a bailout plan for Greece of 130 billion euros, or about $173 billion, in return for a new round of austerity measures.
For the Mexican hosts, there was some irony in watching the Europeans wrangle over debt three decades after Mexico helped set off the Latin American debt crisis. After years of painful adjustment, Mexico’s economy now has low debt, well-managed fiscal accounts and an inflation rate that is under control.
Mr. Geithner said that European action to shore up banks and rescue Greece had staved off the short-term crisis, but he warned that more needed to be done. “It’s important not to rest on that progress,” he said, and to acknowledge that it was based “in part on the expectation that there are more actions to come.”
In an interview, Angel Gurría, the secretary general of the Organization for Economic Cooperation and Development and a former finance minister of Mexico, argued that a very strong firewall was needed to prevent the debt crisis from spreading.
“Let’s say a trillion from the Europeans, half a trillion from the I.M.F.,” he said Friday. “You put this kind of money together, and you announce that it’s going to be there, ready to deal with anybody that wants to mess with any other country. I think you’re never going to have to use it.”
Although the European debt crisis is at the center of talks here, countries are also expected to discuss efforts by the European Union and the United States to gain support for sanctions against Iran. The European Union will cut off Iranian oil imports beginning in July in order to put pressure on Tehran over its nuclear program.