Fin24

Brics want IMF reform for eurozone aid

2011-11-07 11:12

Moscow - Major emerging economies are ready to provide financial help to the eurozone via the International Monetary Fund but in return want commitments to reform the IMF to be implemented, Russian Foreign Minister Sergei Lavrov said on Monday.

The so-called Brics nations “are ready to take part in joint efforts, including the provision of credits, under those rules and channels that exist in the International Monetary Fund”, Lavrov told a news briefing in Moscow.

Lavrov spoke before IMF managing director Christine Lagarde was due to meet President Dmitry Medvedev in Moscow for talks expected to focus on how cash-rich emerging economies can support Europe’s struggle to contain its sovereign debt crisis.

His comments reinforced the joint position towards managing the eurozone sovereign debt crisis taken by the Brics - Brazil, Russia, India, China and South Africa - at last week’s Group of 20 summit in Cannes, France.

They also reflected the aversion of Russia, holder of the world’s third-largest foreign exchange reserves, to directly supporting the eurozone’s common bailout fund, the European Financial Stability Facility (EFSF).

“It will hardly be possible by simply handing out money to resolve problems that are systemic in character and which affect the financial stability and integrity not only of the eurozone but of the global financial system,” Lavrov said.

“Recent events show that the consequences of the 2008 crisis have not passed and that the work started by the G20 right after the crisis has not been finished.

“This work needs to be completed - above all concerning the full implementation of agreements that were reached earlier on the deep reform of the International Monetary Fund and the international financial system as a whole.”

Comments
  • balderdash - 2011-11-07 11:30

    The notion of a country like South Africa contributing to a bail-out of Eurozone economies is bizarre. South Africa's membership in the BRIC nations is as inappropriate as Greece's membership of the Eurozone. I hope that the outcome is less disasterous

      Gierg Seiznem - 2011-11-07 14:16

      SA's position in the BRICS is completely different to Greece's position in the eurozone. As such, we need not worry about a similar situation occurring here beyond the valuable lesson the Greeks are learning that debt has to be repaid and the government budget deficit needs to managed very carefully, a problem we may be facing in the next couple of years if we continue borrowing to pay for wage increases, etc instead of borrowing for infrastructure investment.

      Ryan - 2011-11-07 15:44

      @ Gierg ... something interesting, our infrastructure relative to GDP is at an all time worst level, going back to like 1970. once again, thank you ANC.

      Gierg Seiznem - 2011-11-08 12:35

      @Ryan I can't argue the facts there and it's partly due to government mismanagement, but also partly due to the need for government to spend counter-cyclically following the 2008 crash. I'm not trying to make excuses for the government, they need to accept a lot of responsibility as they are the ruling party, I'm just pointing out, it's partly due to external circumstances. I definitely would not argue that that is a trend that doesn't need to be reversed, especially since a lot of that relative increase in consumption spending is because of wage increases and debt interest payments.

  • Ryan - 2011-11-07 11:53

    with an unofficial unemployment rate of almost 40% and a myriad of other problems (due in no small part to our ineffectual government and some of its silly policies), SA is in no position to be "bailing" out other countries.

      Ryan - 2011-11-07 11:55

      a few years from now and a few more policies later like the NHI and the rest of the world will be bailing us out. lol

  • TheBigBok - 2011-11-07 12:09

    The fact that S.A. is there, and is offering a bailout is a very good thing. This bailout will by no means come free of charge to the Eurozone nations, it is a potential source of income for our nation. It is also good that we are, by association, benefitting from the leadership of other nations especially as we are so lacking in terms of leadership. Someone in our government is making the right connections, for now atleast. Let's profit from the lift that BRICS may give us.

      Ryan - 2011-11-07 12:38

      please explain what economic lift BRICS gives us ? its nice because it makes us look "important". FYI Bok, the monies lent to Greece over the years didnt just come free of charge in retrospect ... Greece is NEVER going to pay back half that debt. but im sure its the same with our billions "given" to Swazi, Zim et al. lets see what we get back.

      tseliso.molukanele - 2011-11-07 12:49

      You really think so? I thought association with China and associating with a group that is in a much different (higher) league was generally bad. These associations have a potential of only benefiting the BRIC (without the S) from our strategic position in relation to our continent and not benefiting our country at all. As you mentioned our leadership is not as strong as it needs to be in the global community and as we focus on overseas policy too much we neglect continental policy which could prove a bad move in the long run.

      Gierg Seiznem - 2011-11-07 14:10

      SA can't offer support by itself, but as a member of BRICS it can (mainly through China). Emerging economies are where the real growth potential is, so an association with countries like the BRIC could be extremely beneficial, especially bearing in mind those countries represent about 40% of the world's population. Obviously, it requires specialisation and careful trade negotiations so that our domestic producers aren't brushed aside, but opening up markets of around 3 billion people can't hurt our trade. Also, having strong allies means a greater voice in international affairs and a potentially a move towards a rebalancing of international power. It remains to be seen if we use this relationship to our advantage, but the US and Europe openly engage with BRIC countries so why would it be automatically a bad thing for us? Also, an association with a "higher league" group is not a bad thing. It provides massive opportunities for "catching up" and technology transfer, besides the obvious trade possibilities. Gaining an improved position for the emerging markets in the IMF, for example, could move us towards a better allocation of funds globally. All that being said, the BRICS is really just a loose association among the major countries on the "developing continents", Africa, South America and Asia. There are no set policies or collective actions that I'm aware of, although the move is towards such agreements in the medium term.

      Ryan - 2011-11-07 15:22

      @ Gierg .. China/the East is already our biggest trading partner, before we were even had a sniff of getting in BRIC. it used to be the EU ... well no more. well I was listening to some educated minds on Bloomberg about SA's participation in BRIC, and the consensus was that economically its really gonna do very little for us and many wondered how we even got included in BRIC. it might be different for BRIC tho. like i said, sure it makes us look good. compared to the BRIC's we look like pip squeaks which sure doesnt buy us bargaining power with them anyway. your last paragraph sums it up quite well.

      Gierg Seiznem - 2011-11-08 12:45

      @Ryan At this point, I'd agree, it's going to have little real economic impact, but I feel (and it's just my opinion) that being part of group of major emerging economies will have benefits for us. We, as SA, don't have much power in international negotiations, with the BRIC countries on our side, that may improve. Of course, the flipside is that our voice could get lost amongst those powerhouses and we will be forced to take up positions against some countries that won't be in our interest. I don't think it's necessarily a good or bad thing, it's what policies are collectively decided on that will be the deciding factor. I'd say it's still early days in our BRICS membership. Also, I'm inclined to believe the only reason we were invited was because of our position in Africa, as you say, we are pip squeaks compared to the other members. Time will tell.

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