Update: IMF Denies Report G20 Mulling $600 Bln Lending Facility

-- Adds IMF Denial

TOKYO (MNI) - The International Monetary Fund has denied the Nikkei report that the Group of 20 nations may set up a $600 billion lending facility at IMF in order to boost the world's ability to deal with the European debt crisis.

"There has been no such discussion with the IMF," an IMF spokesman told Market News International. G20 members including Japan, the U.S. and China will contribute to the new IMF fund, the business daily reported on Thursday.

The European Union already has the European Financial Stability Facility fund, its own fund aimed at containing the sovereign debt crisis in the region, totalling $600 billion.

The new safety net will be on a par with the $580 billion financing program created on the heels of the global financial crisis in 2008, when Japan and the U.S. each put up $100 billion and China provided $50 billion. The G20 will also discuss making use of special drawing rights, a reserve asset from which cash-strapped nations can request withdrawals, according to the Nikkei.

One proposal, now under consideration, calls for increasing the allocations to key nations by about $250 billion and redistributing the money to troubled nations, it said.

The G20 is likely to make the assistance conditional on Europe's own efforts to halt the region's downward spiral, including accelerating the establishment of a permanent rescue program.

Analysts expect the European Central Bank to discuss cutting interest rates and launching further liquidity support measures while EU leaders are widely expected to discuss amending the EU treaty to anchor stricter budget discipline in the euro area in a bid to restore market trust and prevent the sovereign debt crisis from spiraling out of control.

The European Central Bank will hold its governing council meeting on Thursday, followed by the EU summit on Friday.

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