Markets should be reassured, chief says
WASHINGTON – The International Monetary Fund says it has raised more than $430 billion in an effort to assure finance markets that it has sufficient firepower to handle any new problems from Europe’s prolonged debt crisis.
IMF Managing Director Christine Lagarde announced the new figure at the conclusion of discussions among finance officials of the Group of 20 major economic powers on Friday.
Lagarde called the fundraising a “huge effort” that would increase the current $485 billion in funds available for loans to a figure above $1 trillion.
“We have the necessary tools in the tool box and we will use this wisely,” she told reporters at a news conference wrapping up discussions among finance ministers and central bank governors of the G-20 countries.
The United States was represented in the talks by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.
Lagarde said the extra resources would support global economic stability. Finance officials hope that the sizable increase in IMF resources will reassure financial markets that there will be a backstop should another, larger European country get into trouble in repaying its government debts.
Already three European nations – Greece, Ireland and Portugal – have been forced to accept IMF rescue packages along with sizable bailout support from other nations using the euro currency. But the concern is that Spain and Italy, much larger economies, are now facing economic difficulties. If either of those nations needed rescue packages, the costs would be far higher than what has been raised so far.
The fundraising effort exposed splits inside the 188-nation IMF. The United States and Canada refused to participate in boosting the IMF’s resources, seeking to keep pressure on Europe to do more.
And four countries that did not publicly reveal their contributions – China, Russia, India and Brazil – all expressed reservations about pledging additional resources until the IMF implements a 2010 agreement to give emerging market nations more of a say in how the IMF operates. There are doubts whether the deal to boost the voting power of China and other emerging countries can be achieved by the deadline of the fall meetings of the IMF.