Leading world economies on Friday pledged US$430 billion in new funding for the IMF, more than doubling its lending power in a bid to protect the global economy from the eurozone debt crisis.
The promised funds from the G20 advanced and emerging economies aim to ensure the IMF can respond decisively, should the debt problems that have engulfed three eurozone countries spread and threaten a fragile global recovery.
“This is extremely important, necessary, an expression of collective resolve,” IMF Managing Director Christine Lagarde said. “Given the increase that has just taken place, we are north of a trillion dollars actually. So I was a bit mesmerized by the amount.”
Photo: Reuters
The US$1 trillion figure includes both the IMF’s existing and newly won resources, as well as loans already committed.
The IMF would be able to use its increased firepower to help any country or region in need. However, Europe’s crisis was the driving force behind the push for more funds, though officials and investors alike said it merely buys time for Europe to undertake more economic reforms.
Greece, Ireland and Portugal have already received bailouts. Investors now are worried that Italy and Spain, the eurozone’s third and fourth-biggest economies, will fail to bring down their debt burdens quickly enough to satisfy financial markets and be forced to follow the same path.
The IMF traditionally has provided aid to struggling emerging market nations, but the euro zone debt crisis has made big industrial economies a new focus. Emerging economies, which have been pressing for a greater say at the IMF, joined in pledging additional funds.
In a central bank statement, China said it “will not be absent from the table” of increasing funds for the IMF, but it did not specify any amount.
Worries about the debt crisis have dominated talks among finance officials in Washington this week for the semi-annual meetings of the IMF and the World Bank, with Spain facing special scrutiny.
The IMF has warned that the crisis presents the gravest risk to global economic expansion, though the G20 said in its statement that the threat of a major blowup has started to recede. The IMF estimated in January it would need US$600 billion in fresh funds, but Lagarde lowered that figure to US$400 billion, saying actions Europe had taken to quell the crisis had cut the risk.
In a sign investors lack confidence that a big IMF war chest can draw a line under the region’s problems, both Spanish and Italian bonds faced pressure on Friday. The yield on Spain’s 10-year bond topped 6 percent before retreating.
David Keeble, global head of interest rate strategy at Credit Agricole Corp, said the expansion of the IMF’s coffers was only a start in resolving the eurozone crisis.
“The US$430 billion is a nice enough size. I’m guessing that they’ll get a few billion more, although the market will no doubt come to the conclusion that no number is big enough,” he said.
Indeed, IMF officials said the new funds would only buy time for Europe to continue difficult economic reforms. Tensions over whether European countries are sufficiently committed to making deep and painful cuts to their budget deficits or whether EU policymakers have dug deeply enough into their own pockets have plagued G20 talks over financial resources.
Lagarde defended Europe’s actions to date, saying its package of fiscal, financial and monetary measures taken in recent months were “sufficient.”
However, the head of the IMF’s steering committee, Singaporean Minister of Finance Tharman Shanmugaratnam, was more cautious.
“Whether Europe has done enough to build up its firewall depends really on its reforms,” he said, speaking alongside Lagarde. “If its reforms lose credibility, if its reforms lose momentum, then quite frankly the firewall is not enough. So it depends entirely on the commitment to reform.”
Not all G20 members were committing new funds.
The US has said it has already done enough by providing US dollar liquidity for European banks and Canada has said Europe needs to do more to erect a financial firewall, although it did not close the door completely.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts