Paris - Two years after it requested $500bn to fight off a global slump, the International Monetary Fund’s (IMF's) call for a further $600bn to limit the fallout from Europe’s debt crisis prompted supportive words from Brussels on Thursday but no stampede in the rest of the world to commit the cash.
The Washington-based IMF secured a predictably warm response from the European Commission, the European Union’s executive body in Brussels, which urged the G20 economic powers to deliver.
“We would warmly welcome contributions from G20 countries,” said commission spokesperson Amadeu Altafaj.
“This would send a very clear signal to the market to enhance the capacity of the IMF to fulfil its systemic responsibilities to all its members.”
The small Gulf state of Oman, whose central bank boss Hamood Sangour al-Zadjali spoke to Reuters, pledged to chip in and even double its commitment, which by his own admission is nonetheless “very small” next to that of big G20 countries.
Despite Oman’s response and the words of encouragement from Brussels, the initial reactions of major paymasters outside Europe were muted.
Japan and South Korea said they wanted to see decisive steps from Europe to stem a crisis that spilled out of Greece almost two years ago, rattling investor confidence and banks far more widely.
China said the IMF should be able to count on the support of G20 nations but stopped short of signalling any hard commitment of its own to provide more money.
The reactions in Asia followed even cooler ones on Wednesday from Canada and above all the United States, which is every bit as cash-strapped and indebted as Europe since the slump of 2008-09.
“We continue to believe that the IMF can play an important role in Europe, but only as a supplement to Europe’s own efforts,” a US Treasury spokesperson said. “The IMF cannot substitute for a robust euro area firewall.”
G20 officials meet in Mexico City on Thursday and Friday to discuss IMF resources ahead of a late February meeting of G20 finance ministers.
More firepowerThe IMF is looking for $500bn to beef up its lending capacity from around $380bn at the moment and, according to IMF sources, would like another $100bn to serve as a “protection buffer”.
Europe has already pledged to inject $200bn but has yet to detail who pays how much, after which another $300bn to $400bn is needed to meet the IMF’s call.
Europe’s debt crisis is widely seen as the biggest threat to the global economy.
Many countries exhausted much of their financial firepower fighting the global downturn in 2008 and in 2009, when a first G20 pledge of $500bn to the IMF was made. A fresh global slump would raise fears more countries might need to be rescued by the IMF.
US help looks like the biggests starting snag in the quest for new funds.
With a strained budget at home and an election looming, some US congressional Republicans have threatened to yank $100bn in US money to the IMF if the funds are used to bail out eurozone countries.
The White House is unlikely to want to take the issue on as President Barack Obama seeks re-election later this year.
“We have told our international partners that we have no intention to seek additional resources for the IMF,” a Treasury spokesperson said.
A similar if less strident message has emerged from other key countries.
“Many countries want the Europeans to move ahead with tougher and clearer measures, which at this moment translates to more resources to its stability fund,” a Brazilian government source attending the G20 officials’ meeting in Mexico said.
China, whose initial response came via the Foreign Ministry, said Beijing stood by previous G20 commitments to ensure the IMF has ample funds to cope with the financial crisis. It did not go beyond that.
Bank of Canada governor Mark Carney said it was not clear European governments had done everything necessary to make sure they could fund themselves at sustainable interest rates over the next few years.
“If it makes sense to enhance the resources of the IMF, the principal focus, it would seem, should be on dealing with fallout of the European crisis for innocent bystanders,” he told a news briefing in Ottawa.
Europe 'must do more'Japan stands ready to support the IMF fund-raising drive but wants to see strong efforts by European countries to resolve the crisis first, a senior government source said in Tokyo.
South Korea is also pressing for discussions first about Europe’s contribution and for it to agree on additional measures, another source connected to the process said. European nations have argued that they have done enough and were calling for more IMF resources now.
“If, with the parallel discussion, we can achieve extra measures from the Europeans and afterwards agree on promises of additional resources for the IMF from non-European countries in the G20, I think it would be a good result,” the source said.