G20 nations agreed to push Europe to take extra steps to resolve the debt crisis on Friday as the group also inched toward a deal to boost the IMF’s firepower.
Mexican Deputy Finance Minister Gerardo Rodriguez said talks between G20 officials in Mexico City on Thursday and Friday were a “good starting point,” but no specifics were agreed on how to shore up the Washington-based lender.
“I think there is a good willingness for dialogue with all the countries, European, non-European, the United States, Brazil,” he said at a news conference at the end of the two-day meeting, the first of Mexico’s G20 presidency. “There is a recognition of the measures Europe has taken. But it’s also clear that more needs to be done.”
A G20 source present at the meetings said there was agreement that Europe had to take other steps as a matter of urgency. The source also said the IMF planned to canvass its members about how much each would be prepared to contribute to its funding.
The IMF is seeking to more than double its war chest by raising US$600 billion for new lending. The source said there was “broad agreement” to do this via bilateral loans, but the plan faces roadblocks from the US and other countries, including Canada and Japan, which insist that Europe must first do more to help itself.
Sources involved in the G20 talks said one option could be to lift the combined capacity of the eurozone’s permanent and temporary bailout funds from the current 500 billion euros (US$647 billion).
Rodriguez said there was an “intense discussion” about reforms needed in the light of a fragile global economic environment.
An issues note prepared for delegates ahead of the meeting and obtained by Reuters said global growth could remain weak for years without comprehensive, concrete and far-reaching policy reforms.
After the meeting, which included officials from the world’s biggest economies and major emerging market powerhouses such as China and Brazil, Rodriguez said the aim was to provide a specific plan “in coming months.”
Some countries are pessimistic of reaching a detailed agreement on IMF resources by the time G20 finance ministers and central bank governors meet in Mexico late next month given the difference in opinion between Europeans and non-Europeans.
Europe has already pledged to inject US$200 billion into the IMF, but has yet to detail who pays how much, after which another US$300 billion to US$400 billion would be needed to meet the IMF’s call.
Europe’s debt crisis is widely seen as the biggest threat to the global economy.
Many countries exhausted much of their financial firepower fighting the global downturn in 2008 and in 2009, when an initial G20 pledge of US$500 billion to the IMF was made. A fresh global slump would raise fears that more countries might need to be rescued by the IMF.
A document prepared for G20 delegates said countries had to promote stronger growth through decisive structural reforms.
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