IMF gets bigger reserve pledges
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E-mail Shanghai Daily via agencies, April 20, 2012
International Monetary Fund Managing Director Christine Lagarde yesterday said she has received pledges worth US$320 billion so far in her campaign for a bigger reserve to battle threats to global growth.
"We expect our firepower to be significantly increased," Lagarde said in Washington yesterday ahead of meetings of the world's finance chiefs. She said she foresees more commitments.
Japan, Denmark and Switzerland are among the countries to rally this week to Lagarde's call for a bigger lending capacity beyond the current US$380 billion to shield the world economy against any deepening of Europe's debt turmoil.
Having last month boosted their own defenses beyond US$1 trillion, eurozone policy makers are counting on a reinforcing of the IMF to calm financial markets. Spain now sits in the cross-hairs with the yield on its 10-year bonds closing in on levels at which Greece, Ireland and Portugal required bailouts.
Lagarde, a former French finance minister who took the helm of the IMF in July, is trying to obtain "US$400 billion plus," spokesman William Murray said. That marks a scaling back of the US$600 billion originally sought, reflecting demands for Europe to do more to fix its own woes and a refusal by the US to chip in more money. The lending amount will be lower than the total amount raised because the IMF must keep some cash on hand.
While a boost for the IMF would help it protect smaller economies sideswiped by Europe, it's not enough to defeat the two-year crisis, said Simon Johnson, a former IMF chief economist who now teaches at the Massachusetts Institute of Technology.
"The Europeans have to fix their own problems," Johnson told Bloomberg Television. "Bailing them out, protecting them with generous money from outside will not help them make progress."
The yield on Spain's benchmark has risen about 1 percentage point since the start of March as Prime Minister Mariano Rajoy struggles to meet budget deficit goals.
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