Reprints This copy is for your personal, noncommercial use only.

You can order presentati on-ready copies for distribution to your colleagues, clients or customers here o r use the "Reprints" tool that appears next to any article. Visit www.nytreprint s.com for samples and additional information. Order a reprint of this article no w. December 3, 2011 European Leaders Look to I.M.F. for Assistance, Again, as Euro Crisis Lingers By ANNIE LOWREY and STEVEN ERLANGER WASHINGTON European leaders are looking outside the continent for help solving t he longstanding crisis over the euro, but while the International Monetary Fund may be able to help, it will not be the magic wand they seek. The fund may be asked to assist further as leaders of the 17 European Union nati ons that use the euro meet to prepare for a summit meeting on Thursday and Frida y. Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France a re scheduled to hold talks in Paris on Monday, and, at the request of President Obama, Treasury Secretary Timothy F. Geithner is meeting with European leaders n ext week. The leaders of the European Union have already turned to the I.M.F. to assist sm aller nations like Ireland, Greece and Portugal. In all three, the fund is provi ding about a third of the necessary loans and its expertise in guiding countries with solvency problems back to recovery. Last month, at the Group of 20 summit meeting in Cannes, the fund was also asked to monitor the economic, state and bu dgetary and structural reforms in huge and shaky Italy not as a lender, at least not yet, but rather to lend its skills and credibility to the efforts of the ne w prime minister, Mario Monti, a technocrat. The I.M.F. lacks the resources to create the much-discussed firewall to keep inter est rates at sustainable levels for troubled euro zone economies, which together have total debts of more than $3.3 trillion. The fund has about $400 billion av ailable to lend worldwide, and bailing out just Italy and Spain would wipe out n early all of that. Italy alone has $200 billion in debt to roll over in the next six months, and Spain about $150 billion. European policymakers are looking to the fund to help ensure budgetary restraint while perhaps also serving as a vehicle for financing. The I.M.F. could raise o r contribute its own money, or channel money from countries with surpluses, like China. A senior Treasury official said that the I.M.F. might provide additional, spare-t ire capacity by contributing some financing, but that Europe would primarily use its own resources to wrestle down interest rates and keep countries like Spain s olvent. Europe is rich enough. It is not in net deficit, when you balance out trade deficits and surpluses, says Raghuram Rajan, a professor at the of Chicago and former chief economist at the I.M.F. What Europe needs s money that is willing to absorb losses and the I.M.F. is not going the money that absorbs losses. all of the University right now i to provide

Analysts say that Europe will need to provide the bulk of that money itself: thr ough the European Central Bank; the European bailout fund, called the European F inancial Stability Facility; or transfers from fiscally sound countries like Ger many. Consideration of how to use I.M.F. resources and expertise started in earnest at

the Cannes summit in early November. The final communiqu ordered finance ministe rs to develop plans for deploying a range of various options for the fund to help bring down borrowing costs. Some of the options appear to be more likely than others. One is a plan to have euro zone central banks lend money to the I.M.F. The fund could then provide lin es of credit to countries struggling to finance their debts, and could participa te in fiscal monitoring. That plan is gaining support in Europe. It is an easy solution because bilateral loans are coming from the central banks, said Herman Van Rompuy, the European Uni on president, on Thursday, according to Bloomberg News. They havent to ask for mon ey from the taxpayer. A second plan under discussion would have the I.M.F. create new special drawing rights to grant to member countries. Countries hold the special drawing rights a n IOU with a value based on a basket of major currencies as reserves and can tap them in case of an emergency. The measure would be marginal and supplementary, given that the special drawing rights would be apportioned to members according to their contributions to the I.M.F. But by assuring investors that countries ha ve the capacity to repay all loans, such additional special drawing rights could push down borrowing rates. American agreement is necessary to increase I.M.F. funds, and in private convers ations Treasury officials have ruled out that measure for now. Further, Presiden t Obama is considered highly unlikely to ask Congress for extra money to bail ou t Europe, especially in an election year. All the options under consideration are founded on the funds established reputati on for helping countries, albeit sometimes painfully, return to fiscal health an d manage short-term liquidity crises. The fund brings money to the table, says Edwin M. Truman, a al and now a senior fellow at the Peter G. Peterson Institute Economics. But it also brings credibility. The fund has been reating lending programs for decades. It has a reputation for biased. former Treasury offici for International in the business of c being tough and un

Some watchers wonder why the I.M.F. should be involved in aiding such rich count ries at all. This is a European problem, and there is no strong rationale for I.M.F. lending, s aid Simon Johnson, a former I.M.F. chief economist who also contributes to a New York Times blog, Economix. Europe has lots of money and no balance of payments p roblem. The euro is a reserve currency. The Germans can do a lot themselves, and the Germans and the E.C.B. can do everything the I.M.F. can do. Theres no justification under the I.M.F.s articles for the I.M.F. to get involved i n Italy, said Andrew Hilton, director of the Center for the Study of Financial In novation, in London, and a longtime fund watcher. He added that less-wealthy fun d members, like Brazil, Argentina, Russia and India, would have legitimate compl aints about bailing out more wealthy countries. Still, further I.M.F. involvement seems very likely. In recent days, euro zone l eaders have indicated support for a bolstered I.M.F. role in resolving the sover eign-debt crisis. Luc Frieden, Luxembourgs finance minister, said the European bailout fund and the central bank did not have the capacity to ease the crisis alone. We have to do s o together with the I.M.F. and with the E.C.B., within the framework of its inde

pendence, Mr. Frieden told reporters at a meeting of euro zone finance ministers.