Britain backs EU contribution to IMF boost

BRUSSELS (Reuters) - European Union leaders are likely to pledge at least $75 billion (51.6 billion pounds) in new loans to the International Monetary Fund to help stop any "contagion" of financial instability, EU officials said on Thursday.

Leaders of the 27-nation bloc rejected pressure to inject more cash into their economies at a summit in Brussels, despite a U.S. pledge on Wednesday to increase its own recovery effort.

But Polish Finance Minister Jacek Rostowski said he was confident the EU would agree to boost lending to the IMF to strengthen its role in tackling the crisis.

"It is very, very probable that we will have at least $75 billion as the EU contribution to the IMF," he told reporters.

Britain also said it would support the new loans as part of a wider international effort to at least double IMF resources to $500 billion to tackle a slowdown behind rising joblessness and social unrest in rich and poor countries alike.

"As part of a wider global settlement, we would support additional EU loans to the IMF in the region of $75-100 billion," a British official said at the summit, intended to fine-tune the EU's message for a meeting of the Group of Twenty (G20) major and emerging economies in London on April 2.

"We think the potential calls on the IMF could be very significant and we need to make sure that they have a buffer," said the official, warning of a possible "contagion of financial instability" among the world's economies.

The U.S. central bank on Wednesday vowed to pump an extra $1 trillion into the U.S. economy to battle the recession and Washington has led calls for Europe to top up stimulus packages that have failed to reverse the downturn.

But the EU is struggling to agree the details of existing plans to revive the economy through infrastructure projects, and are mostly are putting faith in the welfare state.

Some leaders fear social unrest -- French President Nicolas Sarkozy was attending the summit on a day of mass protests over his handling of a crisis which could push Europe's unemployment rate towards 10 percent this year.

"ENORMOUS DEBTS"

Yet many EU leaders favour tightening regulation rather than moves which could pile up huge deficits that exacerbate problems and put strains on the euro single currency, whose bedrock has been years of fiscal austerity.

"It is not time to look at more growth measures. I disagree with this idea completely," German Chancellor Angela Merkel told German parliament before heading to the summit.

"A competition to outdo each other with promises will not calm the situation."

Merkel said Germany would oppose Europe-wide projects that did not focus on immediate needs -- a reference to an existing, modest plan to spend 5 billion euros ($6.75 billion) of EU money on infrastructure projects.

The EU puts the size of its effort to combat recession at anything between 3.3 and 4 percent of its output, including welfare spending. President Barack Obama plans to devote 5.5 percent of U.S. output to recovery efforts.

"You cannot compare the EU to the U.S.," said Dutch Prime Minister Jan Peter Balkenende. "We have very sound security networks where people who lose their jobs are looked after. The U.S. has enormous debts."

The EU wants to present a united position at the G20 meeting in London next month aimed to produce a plan to put the world economy back on track.

Draft summit conclusions showed EU leaders would be ready to bail out some EU member states -- notably the poorer former communist newcomers -- on a case-by-case basis.

They would also be ready to consider topping up a 25 billion euro emergency fund already used to help Hungary and Latvia.

(Additional reporting by Ingrid Melander, Jan Lopatka and Darren Ennis in Brussels, Noah Barkin in Berlin; Writing by Mark John, Editing by Timothy Heritage)