IMF leaders labor to reassure
Pledge ‘whatever is necessary’; Soros sour on economic crisis
WASHINGTON – Global economic policymakers, gathered Saturday for the annual meeting of the International Monetary Fund, tried to sound united and engaged in their latest effort to assuage financial market concerns about European sovereign debt and the region’s fragile banks.
“Today we agreed to act decisively to tackle the dangers confronting the global economy,” the leaders said in their latest effort, a communique from the IMFC, the IMF’s governing body.
The leaders said that Europe would do “whatever is necessary” to resolve the crisis.
Billionaire investor George Soros, speaking on the sidelines of the IMF meeting, said that the crisis is worse than the global financial crisis in the wake of the collapse of Lehman Brothers in fall 2008.
“In 2008 the right authorities to deal with the crisis were in place. Now they have to be created,” Soros said.
It is unclear whether the latest attempt to calm markets will work. The leaders have been in Washington, D.C., since Thursday trying to sound unified only to see financial markets swoon.
European leaders, often combative when they come to Washington to discuss economics, sounded chastened.
European Union Monetary Affairs Commissioner Olli Rehn said the virtue of the IMF meeting “is to listen to advice, learn and take something home from these meetings.”
Rehn said that European parliaments would ratify plans to give new powers to Europe’s bailout fund, the European Financial Stability Fund, by mid-October.
Other G-20 countries want Europe to increase the size of the 440 billion euro fund. Officials said that proposals on how to do that were floated left and right over the weekend.
Bank of Canada Governor Mark Carney suggested in a radio interview that the EFSF should be increased to the neighborhood of 1 trillion euros.
“We have several options which we will further study,” Rehn said.
Soros said that Europe has to create a Treasury Department. He said the EFSF is an “embryo” of such an agency, but said it still lacks basic powers. “It doesn’t have the authority to spend the funds, and that is what is lacking,” he said.
Soros said it was “almost inevitable” that Europe will have to pass another treaty.
European leaders spent the weekend fighting the sense in Washington that a default by Greece on its government debt was inevitable.
Rehn said that Greece “should not and will not” face a default.
IMF managing director Christine Lagarde tried mightily to be upbeat at a press briefing on Saturday.
“We know also the global economy is … halfway through the work that needs to be done,” Lagarde said.
“It is a question of pushing hard to get to the other side.”
But Soros’ remarks were grimmer.
He said that Europe is facing a fiscal crunch and a credit crunch.