G20 to back IMF’S anti-crisis firewall
IT WILL BE THE FIRST TIME FUND IS RECAPITALISED WITHOUT US INPUT
World leaders meeting in Mexico will agree to boost the $430 billion (Dh1.58 trillion) firewall the International Monetary Fund (IMF) announced in April, host President Felipe Calderon said.
“I estimate that there will be a larger capitalisation than the pre-accord reached in Washington, which will be finalised here, but I don’t want to speculate by how much,” Calderon told reporters yesterday in the coastal resort of Los Cabos.
Leaders of the Group of 20 nations are gathering in Los Cabos for a two-day summit beginning today that will be dominated by the financial crisis in Europe, which the White House said on June 15 is the key risk to the global economy. While the G20 agreed earlier this year to bolster IMF resources that could be channelled to defuse the Euro-area crisis, German Chancellor Angela Merkel last week called on the G20 to do more.
“I hope there’s a very important agreement about the IMF,” Calderon said. While he said he regrets that the US won’t take part in the IMF recapitalisation, that won’t prevent it being the largest in the fund’s history.
“It’s going to be the first time the fund is capitalised without the US, which reflects the importance of emerging markets,” Calderon said.
Lagarde’s focus
IMF chief Christine Lagarde, who is due to attend the June 18-19 Los Cabos meeting, said earlier this year that she wants to raise the Washington-based fund’s lending capacity by $500 billion to fend off “further shocks” to the global economy.
In April, she managed to win commitment for about $430 billion, with key emergingmarkets such as Brazil and China withholding their specific pledges until progress is made giving them a bigger say in how the lender is run. Lagarde cancelled a trip to Brazil to focus on “ongoing developments in Europe”.
Angel Gurria, secretary-general of the Paris-based Organisation for Economic Cooperation anddevelopment, signalled that emerging nations may supply some of the IMF boost.
“Those large emerging countries that are part of the G20 are now part of the solution,” he told reporters in Los Cabos yesterday, when asked about Calderon’s comments.
The G20 summit takes place amid the weakest international economy since the 2009 recession and the day after parliamentary elections in Greece. A victory later today for Syriza, an anti-austerity party, may lead Greece to renege on the terms of its bailout and become the first nation to leave the euro currency union, throwing global markets into turmoil.
The global economy is at a “very dangerous moment,” World Bank President Robert Zoellick said. “If people don’t come to the fundamental decisions, first at a national level, but work it out internationally, very bad things could happen.”