IMF donors worry about Europe bailouts
The International Monetary Fund wrapped up meetings Saturday with its
coffers to fight the eurozone crisis $430 billion richer.
But it also collected a message from the emerging economies that
contributed that it should not easily throw more money into Europe, and
that they want more say in how the IMF is run.
International Monetary Fund (IMF) Managing Director
Christine Lagarde speaks during a press conference following
the International Monetary and Financial Committee plenary
session at the IMF World Bank Annual Spring Meetings in
Washington on April 21. AFP |
There was some clear relief in the air after the IMF and Group of 20
major economies came out of their meetings Friday with commitments from
the leading emerging economies Brazil, Russia, India and China to
contribute to the fund's "global firewall." With worries now that Spain
and Italy are on the verge of needing rescues, the funding boost is
aimed at preventing new financial crises from ripping through global
markets.
"It is nice to have a big umbrella, or a big firewall... and that was
really the achievement" of the IMF-G20 meeting, IMF Managing Director
Christine Lagarde said.
The IMF had already cut its goal for the firewall funding from $500
billion to $400 billion, with its major shareholder the United States
declining to contribute and the emerging giants, known as the BRICS,
clearly nervous that their contributions might end up in a European
black hole.
Early on eurozone countries ponied up $200 billion and Japan $60
billion. But it was only at the Friday financial summit that the IMF was
able to pull in the balance.
Britain, South Korea and Saudi Arabia each pledged $15 billion;
smaller amounts came from other European governments, and then, finally,
the BRICS and three Southeast Asian countries promised a collective $68
billion, though no specific amounts were given.
The amount doubled the IMF's resources for intervening in crises, and
together with the eurozone's own recently assembled $1 trillion
firewall, was close to what IMF analysts say is necessary to prevent
financial contagion that spill from Europe.
"Well this is it, and it's good. Because of the debate about the
European firewall, IMF resources had been taking up a lot of time, and I
think it was about time that that conclusion was taken here," said
Danish Finance Minister Margrethe Vestager.
But the money came with warnings from IMF members not part of the
US-Europe-Japan axis that dominates the Washington-based global lender.
First, they worried that after committing some $130 billion already
to rescues of Greece, Portugal and Ireland, the IMF board would too
easily give in to another bailout of a foundering eurozone economy.
Canadian Finance Minister Jim Flaherty suggested there was lighter
treatment for eurozone clients than other crisis borrowers.
"There is some discomfort with that quite frankly. There ought not to
be particularly different treatment for anybody," he said.
Argentine Economy Minister Hernan Lorenzino, who represents several
Latin American countries at the IMF, echoed that.
"During this process, many rules of the Fund had been changed to
accommodate the support to the most-needed countries in Europe in a way
that was not seen at the time of the Asian crisis in 1997 or the Latin
American crisis in the 2000s." Lagarde though insisted nothing had
changed in the IMF approach.
"What has been clearly reminded through the course of the discussion
is that, number one, that those bilateral loans... do not form a special
pot of funds or coffers that have an EU label on it.
AFP |