Washington - An infusion of hundreds of billions of dollars will
give the International Monetary Fund a badly needed boost to tackle
Europe's prolonged debt crisis. But global finance officials sent a
strong message Saturday that struggling governments must speed reforms
or risk spooking jittery markets and raising the economic danger.
The lending agency said in a statement after its
weekend meetings that financially-strapped European countries must put
in place bold changes to resolve their debt problems. The IMF received
$430 billion in pledges from individual countries, nearly doubling the
agency's reserves available for loans to almost $1 trillion.
"It is nice to have a big umbrella," Managing Director
Christine Lagarde said at a news conference. She and other officials
said the new money should reassure financial markets troubled recently
by the prospect that Spain could come next to the IMF for emergency
loans to escape a default.
The 188-nation IMF, working with European governments,
has provided rescue programs already for Greece, Portugal and Ireland.
Spain, however, is a much bigger economy and would require much more
financial assistance were it unable to sell its government debt to
The statement by the IMF's policy committee said it was
important for European countries to commit to bold reforms and put them
Europe's problems dominated the discussions of finance
officials who assembled in Washington for the spring meetings of the IMF
and the World Bank. Those gatherings were preceded by talks among the
Group of 20 major economic powers; the G-20 includes traditional
economic powers such as the United States and Germany and developing
nations including China and Brazil.
The meetings concluded Saturday with a final statement from the committee which sets policy for the World Bank.
"Policy adjustments and improved economic activity have
reduced the threat of a sharp global slowdown," the World Bank
committee said. But the panel said poor countries still faced challenges
and remained in need of programs to reduce poverty and promote economic
In past years, thousands of demonstrators have
sometimes turned out at the spring meetings to protest against the ills
of globalization. But this year only a handful of protesters showed up.
Police said they had made three arrests by Saturday afternoon.
Tharman Shanmugaratnam, Singapore's finance minister
and the chairman of the IMF's policy-setting committee, said the IMF
recognized that the world had to strike a balance between getting
government budgets back under control while at the same time promoting
U.S. Treasury Secretary Timothy Geithner told the IMF
panel that Europe needs to be more creative and aggressive in fighting
its debt crisis, using all the resources at its disposal, including the
European Central Bank, the lender for the 17 nations using the common
"The success of the next phase of the crisis response
will hinge on Europe's willingness and ability ... to apply its tools
and processes creatively, flexibly and aggressively to support countries
as they implement reforms and stay ahead of the markets," Geithner said
The additional $430 billion in resources was announced
by Lagarde following the G-20 meeting Friday. The United States and
Canada were two rich countries that did not make pledges. The United
States would face problems winning congressional backing for increased
support for the IMF and Canada expressed the view that Europe, as a rich
continent, had sufficient resources to deal with its debt problems.
"They need to step up to the plate and overwhelm this
issue with their own resources," Canadian Finance Minister Jim Flaherty
Lagarde said Russia, India, China and Brazil had made
private pledges but did not want to make public commitments until they
had conferred with officials back home. This group has pushed for the
IMF to move to put in place a 2010 agreement giving fast-growing,
emerging economies such as theirs more of a voice in the agency's
The IMF has struggled to find agreement because Europe
will have to give up some of its voting power and seats on the 24-member
executive board. At the moment, Europe controls eight seats; the
expectation is that it could lose perhaps two.
Brazil, one of the developing countries that made a
pledge but has not revealed the amount, has been vocal in its criticism
of the IMF for allowing countries in Europe to delay resolution of the
dispute over rebalancing the voting power.
Brazilian Finance Minister Guido Mantega said in his
speech to the IMF committee Saturday that the resistance of some
countries to the change in voting power had been "deeply damaging to
He said that even though Brazil would rank as the third
largest economy in Europe behind Germany and France, its voting power
at the IMF was equivalent to the Netherlands and smaller than Spain,
Italy and Britain.
Elizabeth Stuart, a spokeswoman for Oxfam, the
international aid agency, said that it was critical for the IMF to
resolve the disputes over voting power so that the 2010 agreement can be
implemented by the IMF's fall meeting.
"It is outrageous that a country like Luxemburg has more voting weight at the IMF than South Africa or Argentina," she said.
Of the more than $430 billion in increased support that
the IMF raised, the agency released a list of specific commitments from
12 individual nations ranging from $60 billion from Japan to $2 billion
from the Czech Republic. The biggest total amount was $200 billion
pledged back in December by Europe.
Italian Premier Mario Monti said Saturday in Milan that
the IMF's move to boost its resources to provide a financial backstop
for Europe was a clear sign that Italy and the rest of Europe "had put
its house in order."
On the question of whether the expanded IMF resources
would be enough, Monti said, "I ask myself if this will be enough. I say
that this is something objectively important, but market reactions are
not always predictable, and it is not wise for those who govern to make
Monti took office in November, pledging to get control
of an enormous government debt that pushed Italy's borrowing costs to
dangerous levels last year.