Data shows eurozone crisis drove Germany to brink of recession at the end of 2011
George Osborne indicated on Wednesday that Britain may need to pour billions of pounds into the International Monetary Fund to give it the resources to deal with more financial crises.
The chancellor told MPs, in an appearance before the Treasury select committee, that Britain would be willing to make a contribution if there was a "well-argued case put forward". But he stressed that any extra funds must be used for general purposes, and not to bail out troubled eurozone countries directly – and reminded MPs that he might have to go parliament for approval for any sizable contribution.
"If it is a good case then ourselves and other countries like Japan, like Australia, will look at that, I am sure, favourably," Osborne said. His remarks were seized upon by Andrew Tyrie, the Conservative MP who chairs the select committee.
"What the chancellor appears to have been doing is sending his opposite numbers a message that his room for manoeuvre is limited while at the same time he also appeared to be saying that he was not excluding more support for the IMF," Tyrie said.
Treasury sources insisted there was no change to the stance of the chancellor who made his remarks as support increased for a Europe-wide bank tax, which is fiercely opposed by Osborne and David Cameron, the prime minister, who pledged on Sunday to veto any such proposal unless it could be introduced internationally.
Mario Monti, the new Italian premier, became the latest eurozone leader to say that his government was ready to back the initiative, but only "on a European Union level". It doesn't make any sense to Italy to "go it alone", he said. France and Germany are expected to table joint proposals for creating a transactions tax on 23 January, which will be discussed at an EU-wide summit a week later.
Monti's backing for the proposal came as the latest economic data from Germany revealed that the eurozone crisis drove Europe's largest economy to the brink of recession at the end of 2011.
Germany's federal statistical office said the economy expanded by 3% in the year as a whole, but recorded a contraction of about 0.25% in the final three months of the year. A second successive negative quarter at the start of 2012 would signal a recession at the core of Europe.
"This represents bad news for the entire eurozone. If Germany's not growing, nobody will be," said Jeremy Cook, chief economist at the foreign exchange firm World First. France and Germany hope that a small tax on trading in shares and currencies will raise tens of billions of euros, while the European commission proposals would apply to financial institutions according to where they are incorporated – so French and German banks with operations in London would in theory be liable.
The German banking association warned that if the tax only applied within the eurozone, it would create "tax havens" within Europe, encouraging firms to flee to countries where the levy was not in place.
Monti had earlier used an interview with the German newspaper Die Welt published on Wednesday morning to warn that Italians could possibly turn hostile toward Europe and Germany if the austerity measures they have accepted do not lead to any visible progress in the country's financial situation. But asked by reporters about potential protests in Italy, Monti said simply that while Italians "broadly back a very hard series of measures" (more than he thought possible), this support needed "recognition".
Angela Merkel, the German chancellor, praised Italian austerity – Monti has introduced €33bn (£27bn) of cuts but wants to be rewarded with an interest rate drop. "In the financial markets, high interest rates could have been justified when markets were diffident about Italian economic policy, but not anymore," he said, "especially after representatives of those same markets have said they appreciated the efforts made."
With a passion perhaps unexpected from the man dubbed an unromantic technocrat, Monti declared that: "The European Union remains the most beautiful construction put in place by humanity."