IMF says secures $320 billion in drive for new funds
WASHINGTON (Reuters) - The International Monetary Fund said on Wednesday it had raised $320 billion so far in a bid to boost its firepower to deal with the euro zone debt crisis, with Poland and Switzerland joining the effort.
IMF Managing Director Christine Lagarde said she had received commitments of $34 billion on Wednesday, including $8 billion from Poland and "a substantial amount" from Switzerland.
"Ensuring that the Fund has sufficient resources to tackle crises and to promote global economic stability is in the interests of all our members," she said in a statement.
Lagarde is hoping to secure at least $400 billion in commitments from finance officials from around the globe, who meet this week in Washington under the auspices of the Group of 20 nations and the IMF and World Bank.
The issue has taken on new urgency given increased borrowing costs in Spain and Italy that have reignited fears the euro zone crisis could flare again, and that the fallout could imperil the global economic recovery.
The United States has declined to provide fresh funds, saying it had done its part by ensuring dollar liquidity for banks in Europe, but it threw its weight behind the fundraising effort on Wednesday.
"We're actually very supportive of that process and we'll be very supportive of it this week," U.S. Treasury Timothy Geithner said, avoiding past rhetoric about Europe needing to do more first to erect its own financial firewall.
Europe had already said it would provide about $200 billion to the IMF and Japan pledged $60 billion on Tuesday, becoming the first non-European nation to make a commitment.
Sweden said it would commit $10 billion and increase the amount to $14.7 billion later, while Denmark said it would give $7 billion. Norway pledged about $9.3 billion.
The effort to expand the IMF's coffers is expected to dominate a meeting of G20 finance officials over dinner on Thursday and during the day on Friday. It will also be front and center at the IMF's semi-annual session on Saturday.
Speaking at the Brookings Institution, Geithner said the commitments that had already flowed in should make it apparent to financial markets that the fund can bulk up quickly when necessary, a prospect that could ease crisis-related jitters.
He said it was a positive that the IMF could raise money quickly to "cushion if necessary the effects of European trauma" on the economies of other nations.
HOPING FOR A DEAL
While Europe has won some praise for actions it has taken to build up its own defenses to keep its debt troubles contained, the IMF warned this week that the crisis was still the single greatest threat to the world economy.
"Solving the issues in Europe is not about a firewall, it's about decisions that will be taken in Europe over a sustained period of time; and it's European actions that will be decisive here as opposed to outside money," Bank of Canada Governor Mark Carney told a news conference.
Carney, who also heads the global Financial Stability Board, said the G20 had yet to reach a consensus on how to proceed.
Like the United States, Canada has ruled out putting more money into the IMF. "Really, the Europeans need to step up to the plate much more than they have," Canadian Finance Minister Jim Flaherty told reporters in Toronto.
But Canada seemed increasingly isolated.
In Mexico, Finance Minister Jose Antonio Meade sounded an optimistic note about a deal for more IMF money. He said commitments made by Japan, Sweden and Denmark were a sign of good progress - a potentially significant comment because Mexico, as this year's G20 chair, has a chance to shape not only the agenda but the outcome of this week's talks.
"It creates a good environment for the meeting," Meade said of money pledges.
Germany's finance minister, Wolfgang Schaeuble, predicted in an interview with Reuters on Tuesday that a deal would be reached this week.
A number of emerging market economies, including China, Russia and Brazil have been cautious about providing more money to the IMF. They want commitments the new resources will be accompanied by more voting power at the global lender.
In a report on global financial stability, the IMF offered advice for Europe: set a course for fiscal union to match the existing monetary union so that unified policy can be passed that works equally for members and makes it harder for financial markets to single out the weakest for attack.
"European authorities need to provide investors with a clear vision of where monetary union is going, because the answer to this is more and better Europe, not less Europe," IMF financial counselor Jose Vinals said as he issued the report.
The IMF urged central supervision of European banks. It also suggested that the European Union should consider injecting public capital into banks - a tactic the United States employed in 2008 when its banking system was at risk of collapse.
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