Publications
Partners
Paris - Proposals to double the size of the IMF as part of a broader international response to Europe's debt crisis immediately ran into resistance from the United States and others, burying the idea for now and firmly putting the onus back on Europe.
The outlines of the plan, that had the backing of several developing economies, emerged as G20 finance ministers and central bankers began meeting in Paris to discuss a world economy under threat from European nations mired in debt.
One G20 source said some policymakers backed injecting some $350bn into the International Monetary Fund. Other options under consideration included loans, special purpose vehicles and note purchase agreements.
Treasury Secretary Timothy Geithner wasted no time in shooting the idea down. The IMF's dominant shareholders, including the United States, Japan, Germany and China, are content that the fund's $380bn worth of resources is enough. Canada and Australia also voiced opposition.
"They (the IMF) have very substantial resources that are uncommitted," Geithner said.
The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.
"The first priority here is for Europeans to put their own house in order," Australian Finance Minister Wayne Swan said.
The finance ministers of France and Germany, under pressure from the rest of the world to act in concert, made a fresh commitment to have a plan for the eurozone in place before a summit of G20 leaders in Cannes on Nov 3/4.
Speaking after a lunch meeting with President Nicolas Sarkozy, French Finance Minister Francois Baroin said: "We will continue our discussions in the coming days but we have already come to some agreements that will be very important."
If minds needed concentrating further, the downgrade of Spain's credit rating a few hours earlier highlighted the risk of a much larger economy than Greece coming under threat.
Standard and Poor's cut Spain's long-term credit rating, citing the country's high unemployment, tightening credit and high private sector debt.
French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for a European Union summit on October 23 and parallel discussions are taking place on giving the International Monetary Fund more firepower.
Fears about the damage a default by Greece - and possibly others - could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17% from their 2011 high in May.
Canadian Finance Minister Jim Flaherty also said the G20 should keep up pressure on the eurozone on its "arduous" journey toward a solution and not focus on IMF resources.
Unlike in 2009 when the G20 launched coordinated stimulus to pull the world out of crisis, the rest of the world is chafing at Europe's slow response while Washington and Beijing are sparring over the yuan currency.
Whilst the EFSF has the resources to cope with bailouts for Greece, Portugal and Ireland, it would be overwhelmed by the need to rescue a bigger economy such as Italy or Spain which have come under market attack.
"We see heightened risks to Spain's growth prospects due to high unemployment, tighter financial conditions, the still high level of private sector debt, and the likely economic slowdown in Spain's main trading partners," S&P said.
The most effective method would be to turn the EFSF into a bank so it could draw on European Central Bank resources. Both Germany and the ECB are opposed to that.
The G20 may refer to the euro crisis in its communique and in closing news conferences on Saturday evening, but little else of substance is likely to be inked in with a EU summit in nine day's time the make-or-break moment.
G20 sources said most Brics economies were in favor of bolstering the IMF's capital as a crisis-fighting tool.
"We have said this before and have conveyed this again, that if emerging economies and the Brics are called upon to contribute, we can do it via the International Monetary Fund," one of the sources said. "India is open to it, China and Brazil are also okay with the idea."
The outlines of the plan, that had the backing of several developing economies, emerged as G20 finance ministers and central bankers began meeting in Paris to discuss a world economy under threat from European nations mired in debt.
One G20 source said some policymakers backed injecting some $350bn into the International Monetary Fund. Other options under consideration included loans, special purpose vehicles and note purchase agreements.
Treasury Secretary Timothy Geithner wasted no time in shooting the idea down. The IMF's dominant shareholders, including the United States, Japan, Germany and China, are content that the fund's $380bn worth of resources is enough. Canada and Australia also voiced opposition.
"They (the IMF) have very substantial resources that are uncommitted," Geithner said.
The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.
"The first priority here is for Europeans to put their own house in order," Australian Finance Minister Wayne Swan said.
The finance ministers of France and Germany, under pressure from the rest of the world to act in concert, made a fresh commitment to have a plan for the eurozone in place before a summit of G20 leaders in Cannes on Nov 3/4.
Speaking after a lunch meeting with President Nicolas Sarkozy, French Finance Minister Francois Baroin said: "We will continue our discussions in the coming days but we have already come to some agreements that will be very important."
If minds needed concentrating further, the downgrade of Spain's credit rating a few hours earlier highlighted the risk of a much larger economy than Greece coming under threat.
Standard and Poor's cut Spain's long-term credit rating, citing the country's high unemployment, tightening credit and high private sector debt.
French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for a European Union summit on October 23 and parallel discussions are taking place on giving the International Monetary Fund more firepower.
Fears about the damage a default by Greece - and possibly others - could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17% from their 2011 high in May.
Canadian Finance Minister Jim Flaherty also said the G20 should keep up pressure on the eurozone on its "arduous" journey toward a solution and not focus on IMF resources.
Unlike in 2009 when the G20 launched coordinated stimulus to pull the world out of crisis, the rest of the world is chafing at Europe's slow response while Washington and Beijing are sparring over the yuan currency.
Whilst the EFSF has the resources to cope with bailouts for Greece, Portugal and Ireland, it would be overwhelmed by the need to rescue a bigger economy such as Italy or Spain which have come under market attack.
"We see heightened risks to Spain's growth prospects due to high unemployment, tighter financial conditions, the still high level of private sector debt, and the likely economic slowdown in Spain's main trading partners," S&P said.
The most effective method would be to turn the EFSF into a bank so it could draw on European Central Bank resources. Both Germany and the ECB are opposed to that.
The G20 may refer to the euro crisis in its communique and in closing news conferences on Saturday evening, but little else of substance is likely to be inked in with a EU summit in nine day's time the make-or-break moment.
G20 sources said most Brics economies were in favor of bolstering the IMF's capital as a crisis-fighting tool.
"We have said this before and have conveyed this again, that if emerging economies and the Brics are called upon to contribute, we can do it via the International Monetary Fund," one of the sources said. "India is open to it, China and Brazil are also okay with the idea."
