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Business

EU to call for a doubling of IMF resources to face economic crisis

Latest update : 2009-03-09

According to a draft statement by EU finance ministers ahead of the G20 summit in London, the EU supports doubling IMF resources for countries affected by the economic crisis to 500 billion dollars (396 billion euros).

AFP - The European Union will call on Tuesday for the International Monetary Fund's resources for struggling nations to be doubled to 500 billion dollars (396 billion euros), a draft document showed.

"It is essential that the IMF has appropriate financial means to assist countries particularly affected by the current crisis," said the text EU finance ministers are due to approve ahead of a key G20 summit in London.

"EU member states support a doubling of IMF resources and are ready to contribute to a temporary increase if needed," the document added.

However, the draft statement seen by AFP on Monday, which is subject to last-minute changes, stressed that "while quotas should be the main source of IMF financing, their increase is not a viable solution in the short term."

Each IMF nation is assigned a quota based on its relative size in the world economy, and are used as the basis for how much member states must contribute and how big of a say they have at the international lender.

The EU document said that "additional resources should be mobilized in the first instance via enlarging and expanding" an existing facility known as the New Arrangements to Borrow, a credit line from members that can be tapped in exceptional circumstances.

While the document recommended "shared burden sharing," it suggested that the extra funds could come in particular from countries which have amassed huge foreign reserves -- an allusion to countries such as China and Japan.

While Japan already contributes to the New Arrangements to Borrow facility, China does not.

The IMF has repeatedly warned that its resources, and therefore its ability to lend to countries in difficulty, could shrink if the economic crisis endures.

It has already signed an agreement for Japan to borrow up to 100 billion dollars, although other reserve rich countries have not followed Tokyo's example.

The European members of the G20 group -- Britain, France, Germany and Italy -- have voiced support for doubling IMF resources in preparation for a G20 summit of leading economic powers on April 2.

Date created : 2009-03-09

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