International Monetary Fund Managing Director Christine Lagarde said she expects more contributions after landing pledges of about $320 billion in her campaign for bigger reserves to combat threats to global growth.
“I look at this pot of money as an umbrella,” Lagarde said today on Bloomberg Television’s “InBusiness With Margaret Brennan” in Washington before meetings of the world’s finance chiefs.
“There are clouds on the horizon.”Japan, Denmark and Switzerland are among the countries to rally this week to Lagarde’s call for a bigger lending capacity beyond the current $380 billion to shield the world economy against any deepening of Europe’s debt turmoil.
Having last month boosted their own defenses beyond $1 trillion, euro-area policy makers are counting on a reinforcing of the IMF to calm financial markets.
Spain now sits in the crosshairs 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 last July, is trying to obtain “$400 billion plus,” spokesman William Murray said.
That marks a scaling back of the $600 billion originally sought, reflecting demands for Europe to do more to fix its own woes and a refusal by the U.S. 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.
Two-Year Crisis
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. Lagarde also acknowledged Europe must address its fiscal imbalances and find ways to bolster growth.
“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 jumped about 1 percentage point since the beginning of March as Prime Minister Mariano Rajoy struggles to meet budget deficit targets.
French yields have also climbed as Socialist candidate Francois Hollande pulls further ahead in polls in the run up to France’s April 22 presidential election.
Euro-area finance ministers decided March 30 that 500 billion euros in fresh money would go along with 300 billion euros already committed to create an 800 billion-euro defense against the woes. That stopped short of a bolder proposal that would have taken the amount close to 1 trillion euros.
Largest Shareholder
The U.S., the IMF’s largest shareholder, is refusing to offer more cash in part because of skepticism Europe has done enough, the view the IMF has substantial resources already and reluctance to seek more money from Congress in an election year.
U.S. Treasury Secretary Timothy F. Geithner yesterday called for a “a clean and unequivocal commitment” by European policy makers to ensure countries can borrow at sustainable interest rates, noting they had “put in place a stronger set of tools for managing this crisis.”
“In the U.S., with an election only six months away, any ’bailing out’ of Europe would be misinterpreted,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in an e-mail. “Leadership, therefore, is lacking.”
China is still willing to discuss means for funding the IMF with member countries, Foreign Ministry spokesman Liu Weimin said at a briefing in Beijing today.
bloomberg.com
“I look at this pot of money as an umbrella,” Lagarde said today on Bloomberg Television’s “InBusiness With Margaret Brennan” in Washington before meetings of the world’s finance chiefs.
“There are clouds on the horizon.”Japan, Denmark and Switzerland are among the countries to rally this week to Lagarde’s call for a bigger lending capacity beyond the current $380 billion to shield the world economy against any deepening of Europe’s debt turmoil.
Having last month boosted their own defenses beyond $1 trillion, euro-area policy makers are counting on a reinforcing of the IMF to calm financial markets.
Spain now sits in the crosshairs 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 last July, is trying to obtain “$400 billion plus,” spokesman William Murray said.
That marks a scaling back of the $600 billion originally sought, reflecting demands for Europe to do more to fix its own woes and a refusal by the U.S. 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.
Two-Year Crisis
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. Lagarde also acknowledged Europe must address its fiscal imbalances and find ways to bolster growth.
“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 jumped about 1 percentage point since the beginning of March as Prime Minister Mariano Rajoy struggles to meet budget deficit targets.
French yields have also climbed as Socialist candidate Francois Hollande pulls further ahead in polls in the run up to France’s April 22 presidential election.
Euro-area finance ministers decided March 30 that 500 billion euros in fresh money would go along with 300 billion euros already committed to create an 800 billion-euro defense against the woes. That stopped short of a bolder proposal that would have taken the amount close to 1 trillion euros.
Largest Shareholder
The U.S., the IMF’s largest shareholder, is refusing to offer more cash in part because of skepticism Europe has done enough, the view the IMF has substantial resources already and reluctance to seek more money from Congress in an election year.
U.S. Treasury Secretary Timothy F. Geithner yesterday called for a “a clean and unequivocal commitment” by European policy makers to ensure countries can borrow at sustainable interest rates, noting they had “put in place a stronger set of tools for managing this crisis.”
“In the U.S., with an election only six months away, any ’bailing out’ of Europe would be misinterpreted,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in an e-mail. “Leadership, therefore, is lacking.”
China is still willing to discuss means for funding the IMF with member countries, Foreign Ministry spokesman Liu Weimin said at a briefing in Beijing today.
bloomberg.com
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