Euro-area leaders may agree to provide 150 billion euros ($201 billion) in loans through the International Monetary Fund, opening a new financial pipeline to fight the debt crisis, a European Union diplomat said. Euro governments expect that a summit starting tonight will yield a pledge by non-euro EU countries to chip in another 50 billion euros, in loans provided by national central banks, the diplomat told reporters in Brussels today. Under the proposal, national central banks would recycle funds through the IMF, potentially to underwrite precautionary lending programs for Italy or Spain, the two countries judged to be the most vulnerable now, two officials familiar with the plans said last week. Germany, Europe’s dominant economy, hasn’t taken a public stance on the proposal. Chancellor Angela Merkel has insisted that the rest of Europe first bow to tighter rules on budget deficits in order to reassure central bankers about the euro region’s longer-term economic health. Still, the German government wouldn’t bar the Bundesbank from channeling loans to the IMF, Michael Meister, the parliamentary finance spokesman for Merkel’s Christian Democratic Union, said in a Dec. 5 interview. Loans via the IMF would bring central banks onto the frontlines in fighting the crisis without violating European rules that outlaw direct lending by monetary authorities to governments, the EU diplomat told reporters today. The euro area’s 17 national central banks operate under the European Central Bank’s umbrella. ECB President Mario Draghi last week hinted at a stepped-up crisis-fighting role as long as governments move toward a “fiscal compact� that ensures sound public finances. Draghi will brief reporters at 2:30 p.m. in Frankfurt after the bank’s monthly interest-rate-setting meeting. To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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