(AP) IMF urges bold changes in Europe
By HARRY DUNPHY and MARTIN CRUTSINGER
The International Monetary Fund, armed with a replenished arsenal containing billions of dollars to battle Europe’s lingering debt crisis, now must press governments in the eurozone to carry out bold changes to reassure nervous financial markets and avert sending the crisis into a more dangerous phase.
The IMF’s final communique Saturday after hours of high-level meetings did not go beyond saying what structural reforms were needed to restore fiscal health and spur economic growth in the 17 countries that use the euro.
But U.S. Treasury Secretary Timothy Geithner told the IMF policy-setting panel that Europe needs to be more creative and aggressive in fighting its debt crisis, employing all the financial resources at its disposal, including the European Central Bank.
German Finance Minister Wolfgang Schaeuble said the countries experiencing financial crisis in Europe are undertaking far-reaching reform measures.
During the weekend meetings of the IMF and its sister institution, the World Bank, finance ministers and central bank governors said the threat of a sharp global slowdown had eased, but still used words like “weak,” “fragile” and “challenging” to describe the outlook for the future.
The major accomplishment of the weekend was the pledge of at least $430 billion from individual countries that will nearly double IMF’s reserves available for loans to almost $1 trillion.
The IMF, working with European governments, has provided rescue programs already for Greece, Portugal and Ireland, but Spain has a much bigger economy and would require much more financial support should it become unable to sell its government bonds to private investors.
Tharman Shanmugaratnam, Singapore’s finance minister and the chairman of the IMF group, said that the IMF recognized that the world had to strike a delicate balance between getting government budgets back under control while at the same time promoting stronger growth.
The additional $430 billion in resources was announced by Lagarde following meetings of finance officials of the Group of 20 major economic powers Friday. The United States and Canada were two rich countries that did not make pledges. The United States would face problems winning support for increased support for the IMF and Canada expressed the view that Europe, as a rich continent, had sufficient resources to deal with its debt problems.
Lagarde said Russia, India, China and Brazil had made private pledges but did not want to make public commitments until they had conferred with officials back home. This group has pushed for the IMF to put in place a 2010 agreement giving fast-growing, emerging economies such as theirs more of a voice in the agency’s decision-making.
The IMF has struggled to find agreement because Europe will have to give up some of its voting power and seats on the 24-member executive board. At the moment, Europe controls eight; the expectation is that it could lose perhaps two.
Brazil, one of the developing countries that made a pledge but has not revealed the amount, has been vocal in its criticism of the IMF for allowing countries in Europe to delay resolution of the dispute over rebalancing the voting power.
Brazilian Finance Minister Guido Mantega said in his speech to the IMF committee Saturday that the resistance of some countries to the change in voting power had been “deeply damaging to this institution.”
He said that even though Brazil would rank as the third largest economy in Europe behind Germany and France, its voting power at the IMF was equivalent to the Netherlands and smaller than Spain, Italy and Britain.
Elizabeth Stuart, a spokeswoman for Oxfam, the international aid agency, said that it was critical for the IMF to resolve the disputes over voting power so that the 2010 agreement can be implemented by the IMF’s fall meeting.
Of the more than $430 billion in increased support that the IMF raised, the agency released a list of specific commitments from 12 individual nations ranging from $60 billion from Japan to $2 billion from the Czech Republic. The biggest total amount was $200 billion pledged back in December by Europe.
International Monetary Fund: http://www.imf.org
World Bank: http://www.worldbank.org
Associated Press writer Desmond Butler contributed to this report.