IMF chief calls for ‘$400 billion plus’ in new funding

The head of the International Monetary Fund urged members Tuesday to lend more than $400 billion to the global body ahead of a crunch meeting to debate crisis financing.

By (AFP)

Published: Tue 17 Apr 2012, 5:02 PM

Last updated: Tue 7 Apr 2015, 11:09 AM

Asked by German daily Frankfurter Allgemeine Zeitung how much the IMF would need in additional firepower should more eurozone countries require a bailout, Christine Lagarde said: “400 billion dollars plus” (305 billion euros).

“My hope is that we will get a critical mass this week,” added Lagarde in comments published in German.

She had previously called for an additional 500 billion dollars to boost the Fund’s war chest in case more debt-ridden eurozone states fall victim to the crisis.

“We are determined to do whatever is in our power, and I’m open to leaving the issue open for a few weeks, as some countries need more time to get approval through parliamentary procedures,” Lagarde said in a separate interview published by the Italian daily Il Sole 24 Ore.

At a meeting of finance ministers and central bank chiefs from the IMF in Washington starting April 20, officials will discuss the extra financing the Fund needs to combat the debt crisis.

The eurozone had appealed to the IMF to bolster its financial firewall against the crisis but emerging economies and the United States demanded the 17-nation bloc first put its hand in its own pocket.

After a month of wrangling and some German resistance, the eurozone last month clinched a deal it claimed was worth more than one trillion dollars, even though 300 billion euros of that was in loans already pledged.

Lagarde said last week that this action, as well as the European Central Bank offering more than one trillion euros to banks at ultra-cheap rates, had reduced the Fund’s financing needs.

In other comments to the German daily, Lagarde said she was worried about the state of Spanish banks, as markets turn their attention towards Spain, pushing up borrowing costs to near unsustainable levels.

“What worries me most is that Spanish and European bank regulators are concerned that Spanish banks have sufficient capital, have enough of a buffer and have valued their assets appropriately,” she said.

Nevertheless, she added that investors and markets are “by nature almost always scared and worried.”

While cautioning against a rush towards austerity in Spain, Lagarde called for a “steady and fiscally stable effort to give enough room for budget-neutral growth impulses.”

To Il Sole 24 Ore, Lagarde praised efforts by Italy to overcome the crisis.

“Italy has undergone an enormous chapter of change under (Prime Minister) Mario Monti and there are more on the way. This is very positive. There are improvements in Spain as well. They have to continue this way. The markets want stability, she said.

“Governments have to lay out not just the budget for this year and next year, but their future objectives.”

She also called on the European Central Bank to reduce its interest rates to give a boost to the struggling eurozone.

“We see very good reasons for a monetary policy loosening in economies that have inflation under control. There is room for manoeuvre,” she said.

And she also appealed for “common fiscal responsibility” within the euro area, hinting at support for so-called eurobonds, or a pooling of borrowing.

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