Friday, October 14, 2011
US rejects plan to strengthen IMF in euro zone crisis
French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for a European Union summit on Oct. 23.
Proposals to double the size of the IMF as part of a broader international response to Europe's debt crisis immediately ran into resistance from the United States and others, burying the idea for now and firmly putting the onus back on Europe.
The outlines of the plan, that had the backing of several developing economies, emerged as G20 finance ministers and central bankers began meeting in Paris to discuss a world economy under threat from European nations mired in debt.
One G20 source said some policymakers backed injecting some $350 billion into the International Monetary Fund. Other options under consideration included loans, special purpose vehicles and note purchase agreements.
US Treasury Secretary Timothy Geithner wasted no time in shooting the idea down. The IMF's dominant shareholders, including the United States, Japan, Germany and China, are content that the fund's $380 billion worth of resources is enough. Canada and Australia also voiced opposition.
"They (the IMF) have very substantial resources that are uncommitted," Geithner said.
The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.
"The first priority here is for Europeans to put their own house in order," Australian Finance Minister Wayne Swan said.
The finance ministers of France and Germany, under pressure from the rest of the world to act in concert, made a fresh commitment to have a plan for the euro zone in place before a summit of G20 leaders in Cannes on Nov 3/4.
Speaking after a lunch meeting with President Nicolas Sarkozy, French Finance Minister Francois Baroin said: "We will continue our discussions in the coming days but we have already come to some agreements that will be very important."
If minds needed concentrating further, the downgrade of Spain's credit rating a few hours earlier highlighted the risk of a much larger economy than Greece coming under threat.
Standard and Poor's cut Spain's long-term credit rating, citing the country's high
unemployment, tightening credit and high private sector debt.
French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for a European Union summit on Oct. 23. Fears about the damage a default by Greece - and possibly others - could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17 percent from their 2011 high in May.
Canadian Finance Minister Jim Flaherty also said the G20 should keep up pressure on the euro zone on its "arduous" journey towards a solution and not focus on IMF resources.
The outlines of the plan, that had the backing of several developing economies, emerged as G20 finance ministers and central bankers began meeting in Paris to discuss a world economy under threat from European nations mired in debt.
One G20 source said some policymakers backed injecting some $350 billion into the International Monetary Fund. Other options under consideration included loans, special purpose vehicles and note purchase agreements.
US Treasury Secretary Timothy Geithner wasted no time in shooting the idea down. The IMF's dominant shareholders, including the United States, Japan, Germany and China, are content that the fund's $380 billion worth of resources is enough. Canada and Australia also voiced opposition.
"They (the IMF) have very substantial resources that are uncommitted," Geithner said.
The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.
"The first priority here is for Europeans to put their own house in order," Australian Finance Minister Wayne Swan said.
The finance ministers of France and Germany, under pressure from the rest of the world to act in concert, made a fresh commitment to have a plan for the euro zone in place before a summit of G20 leaders in Cannes on Nov 3/4.
Speaking after a lunch meeting with President Nicolas Sarkozy, French Finance Minister Francois Baroin said: "We will continue our discussions in the coming days but we have already come to some agreements that will be very important."
If minds needed concentrating further, the downgrade of Spain's credit rating a few hours earlier highlighted the risk of a much larger economy than Greece coming under threat.
Standard and Poor's cut Spain's long-term credit rating, citing the country's high
unemployment, tightening credit and high private sector debt.
French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for a European Union summit on Oct. 23. Fears about the damage a default by Greece - and possibly others - could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17 percent from their 2011 high in May.
Canadian Finance Minister Jim Flaherty also said the G20 should keep up pressure on the euro zone on its "arduous" journey towards a solution and not focus on IMF resources.
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