WASHINGTON (Reuters) - IMF chief, Dominique Strauss-Kahn, on Sunday welcomed a new European emergency fund to stabilize the euro zone and pledged to work with the EU on a country-by-country basis.
In a statement, Strauss-Kahn said the new 500 billion-euro ($670 billion) European Stabilization Mechanism would help stabilize the global financial system and preserve the economic recovery underway.
EU finance ministers said that the IMF is expected to contribute 250 billion euros, taking the package to 750 billion euros, or close to $1 trillion.
However, Strauss-Kahn did not offer any specifics.
“Our contribution will be on a country-by-country basis, through the whole range of instruments we already have at our disposal.”
“We expect our financial assistance to be broadly in the proportion of our recent European arrangements,” Strauss-Kahn added.
During the global downturn following the collapse of the U.S. subprime mortgage market, the IMF approved emergency financial support for Hungary, Latvia, Romania and Ukraine, among others.
Earlier on Sunday, the IMF quickly approved a 30 billion euro rescue loan for debt-ridden Greece during a special session of its board of member countries, amid growing market turmoil that reflected concerns that Greece’s problem could spread to other euro zone members such as Portugal and Spain.
IMF funding to countries depends on the size of each members’ IMF quota subscriptions, although the institution has approved funds well in excess of many countries’ quotas during the current global financial crisis.
Strauss-Kahn said the IMF would play its part in the new EU mechanism “in the interest of the international community, in addressing the current challenges.”
He also urged actions to put public finances on a sustainable footing in Europe. The Fund has pressed the United States and countries in Europe to outline credible plans to rein in growing public debt, which ballooned since 2008 as governments poured billions of dollars into their economies hit by the global financial crisis.
Last year, the Group of 20 pledged to triple the IMF’s lending capacity to $750 billion to help countries weather the global financial crisis. It recently expanded its own crisis fund to nearly $600 billion, including with new contributions from emerging market economies such as China, Russia, Brazil and India, which will have a say in how the money is spent.
Reporting by Lesley Wroughton; Editing by Neil Fullick