Europe warned not to ease up on dealing with debt


Europe warned not to ease up on dealing with debt

Finance ministers and central bankers hope a $430 billion-plus increase in assistance for the International Monetary Fund is enough to handle any fresh crisis among the 17 nations that share the euro as their currency. But they say European governments cannot ease up on dealing with their debt problems,

By (AP)

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Published: Sat 21 Apr 2012, 11:03 PM

Last updated: Fri 3 Apr 2015, 9:41 AM

US Treasury Secretary Timothy Geithner told finance officials Saturday that Europe needs to be more creative and aggressive in fighting the crisis, using all available resources, including the European Central Bank.

‘The success of the next phase of the crisis response will hinge on Europe’s willingness and ability ... to apply its tools and processes creatively, flexibly and aggressively to support countries as they implement reforms and stay ahead of the markets,’ Geithner said in remarks to the policy-setting panel of the International Monetary Fund.

The 188-nation IMF was wrapping up its spring meeting on Saturday.

IMF Managing Director Christine Lagarde announced the new figure at the conclusion of discussions among the Group of 20 major economic powers Friday. Some countries, including Russia, India, China and Brazil, had made private pledges, she said, but did not want to make public commitments until they had conferred with officials back home.

Lagarde said the fundraising was a ‘huge effort’ to supplement the current $485 billion available for loans to countries in trouble.

‘We have the necessary tools in the toolbox and we will use this wisely,’ she said at a news conference Friday wrapping up the G-20 talks. That group includes traditional economic powers such as the United States and Germany and emerging ones such as China and Brazil.

Finance discussions were to continue Saturday at the spring meetings of the IMF and World Bank. The IMF helps countries with financial crises; the bank provides loans for development projects in many poor nations. Both 188-nation organizations are based in Washington.

Lagarde said the extra resources would help support global economic stability. Finance officials hope the new lending power will be a backstop should another, larger European country get into trouble in repaying 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 eurozone nations. But the concern is that Spain and Italy, much larger economies, are now facing financial difficulties. If either needed rescuing, the costs would be far higher than what has been raised so far.

Showing there was not unanimity on boosting the IMF’s reserves, the US and Canada refused to participate, contending that European countries are wealthy enough to do more.

Four countries did not disclose their contributions. China, Russia, India and Brazil expressed reservations about pledging additional resources until the IMF puts in place a 2010 agreement to give emerging market nations more of a say in how the agency operates.

There are doubts whether the deal to increase the voting power of China and other emerging countries can be achieved anytime soon.

The Europeans, who have eight seats on the 24-member IMF executive board, are reluctant to give up two seats, to make room for cash-rich emerging market countries.

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, including $150 billion from nations that use the euro currency and $50 billion from other European countries.

The support is coming in the form of loans the countries will make to the IMF, which will be able to use those resources to aid countries facing financial difficulties. While most other nations do not have to get approval from their legislatures for these loans to be made by their central banks, the US Federal Reserve cannot extend credit to the IMF without approval by Congress.

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