• Inside Labour

    Terry Bell explores the connection between poultry, poverty and desperation.

  • A new ANC sweeper?

    Have the Guptas' new auditors mastered how to look the other way on cue, asks Solly Moeng.

  • Strategy for the big boys

    Formulating strategy across the span of huge companies is a marathon, says Ian Mann.

All data is delayed
See More

Russia raps eurozone crisis management

Nov 07 2011 18:41
St Petersburg - Russia, holder of the world’s third-largest foreign reserves, gave a vote of no confidence on Monday in Europe’s handling of its debt crisis as the head of the International Monetary Fund (IMF) visited Moscow to seek support.

Prime Minister Vladimir Putin faulted the construction of the eurozone’s bailout fund, the European Financial Stability Facility (EFSF), and reiterated that Russia and other major emerging nations would prefer to channel any aid via the IMF.

Putin said it would have been “right” for the European Central Bank (ECB) to backstop the EFSF, adding that any inflationary risks caused by the resulting monetary creation were justified under current circumstances.

“I know that... many European colleagues think differently - they want strictly to observe the principles of financial discipline and won’t step either to the right or to the left,” he said after hosting regional security talks in St Petersburg.

Separately, Christine Lagarde met President Dmitry Medvedev on her first trip to Moscow as head of the IMF, but no details emerged from their talks.

The eur zone wants to leverage the €440bn EFSF by four or five times to prevent contagion spreading from crisis-hit Greece to Italy, whose borrowing costs are at their highest since 1997 and approaching levels seen as unsustainable.

But the currency union’s largest economy, Germany, has ruled out using the ECB’s balance sheet to pump up the EFSF’s lending power to as much as €1 trillion ($1.4 trillion).

The eurozone has turned to major emerging economies - which together hold trillions of dollars in foreign reserves as a buffer against external shocks - to support the EFSF.

But Moscow has strongly endorsed a joint position reached by the Brics group - Brazil, Russia, India, China and South Africa - at last week’s Group of 20 summit that any aid to the eurozone should go via the IMF.

On Monday, Putin attached no formal conditions, but linked the issue of aid to reforming decision-making at the fund.

“We would expect that, if countries like Russia and China take part in common global efforts, that should be reflected in our status in organizations such as the IMF,” Putin said after the St Petersburg talks, attended by Chinese Premier Wen Jiabao.

Lagarde to Moscow

Neither Medvedev nor Lagarde commented after their meeting. In a speech to students, Lagarde urged leaders to redouble their efforts to overcome the eurozone debt crisis and warned that global economic growth was at risk.

“The economy in general is in a dangerous and uncertain phase - there is clearly a darkening outlook and adverse risks,” she said.

Lagarde will stay in Moscow on Tuesday but was not expected to meet Putin, the senior figure in Russia’s ruling"’tandem" who has announced he will run to return to the presidency next year.

Under Putin, who was president from 2000-08, Russia rebuilt its balance sheet after the domestic debt default of 1998. The country holds half a trillion dollars in foreign reserves and its sovereign debt is just 10% of gross domestic product.

Systemic problems

Stating Moscow’s position in detail, Foreign Minister Sergei Lavrov said earlier that it made no sense to throw money at the eurozone debt crisis without tackling its root causes.

“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.”

Lavrov was referring to efforts to boost the IMF’s lending power initiated at the G20’s London summit in April 2009, as well as giving emerging nations a greater say at the fund.

Russia has said so far that it could commit only up to $10bn to the eurozone through the IMF. G20 finance ministers will meet next month to discuss increasing the IMF’s funding.

“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,” Lavrov said.
christine lagarde  |  brics  |  efsf


Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

We're talking about:


Marketing is a big concern in SA's small business community, followed by a lack of confidence and partnering with the wrong people, according to a survey.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

The drop in inflation:

Previous results · Suggest a vote