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IMF seeks funds for EU debt relief

01-30-2012 15:09 BJT Special Report:2012 Annual Meeting of World Economic Forum |

By Fu Jing (China Daily)

DAVOS, Switzerland - In response to widespread anxiety over funding sources for debt relief in Europe, the head of the International Monetary Fund gave assurances that "many countries" have committed to contributing financial resources.

Christine Lagarde, managing director of the IMF, said it is not a good time to go into details about which countries have already made a commitment. She said finalizing these deals requires long negotiations.

"I can tell you that we are in the process of negotiation, and many countries have already committed to making such a contribution," Lagarde told China Daily over the weekend at the annual meeting of the World Economic Forum.

Lagarde said she plans to make a case for why emerging countries should lend aid to the ailing European economy on the basis of four reasons.

First, because all countries are interconnected and dependent economically, no country can be immune from the crisis. Second, the commitment of resources shows confidence in the world economy, she said.

Lagarde said the contribution is used to build up a financial firewall and investor confidence. It will likely not be used, she said.

Lastly, even if the funds are used, they will be paid off with stable returns as our previous investment experiences have already shown, said Lagarde, who recently visited emerging economies, such as South Africa and China, to mobilize resources.

Lagarde did not say whether she would accelerate the pace of reforms to IMF voting rights and governance to attract more resources, which emerging countries such as China, India and Mexico are clamoring for.

In an earlier interview, Li Daokui, a policy advisor with China's central bank and a professor of economics with Tsinghua University, said the Chinese government will contribute to the IMF only if it sees a viable rescue plan from the European Union.

Felipe Calderon, President of Mexico, which holds the rotating presidency of the G20 in 2012, said his country has already promised to offer more financial resources to the IMF and urged the congress of the United States, which has veto rights within IMF, not to block the contribution bill if the administration proposes to do so.

Gerardo Rodriguez Regordosa, under-secretary of Finance and Public Credit of Mexico, said that within the G20 framework, China, along with other surplus countries, has already committed to global rebalancing efforts by boosting domestic consumption, investing in the social security network and other efforts.

"Meanwhile, China has already become an important creditor of the world. It also means that it plays a very important role in strengthening international monetary and financial institutions," said Regordosa.

"Within the G20, we have an important task of expanding collective bases of firewall in order to avoid an international contagion of crisis. In that sense, China should play an important role in the G20 process," he said.

So far, the G20 has not discussed committing funds from member countries to relief in the European Union, so the number of commitments from every individual country is unknown, Regordosa said.

"There is no specific number, but there is a good environment and a very clear conviction within the G20 that we will all collectively strengthen our firewall and international financial institutions," Regordosa said.

In its role as the holder of G20's rotating presidency, Regordosa said Mexico will fully push forward the implementation of governance reform and even go beyond that to reconfigure the seats within the IMF board to favor emerging economies. Additionally, Mexico will use its position to seek more voting rights for emerging economies, he said.

"China has already been an important player in the negotiations and discussions, and we have kept very close contact," said Regordosa. "We certainly need China, the G20 needs China, and the world needs China."

Amid worsening crisis and a gloomy global economic outlook, "everyone is looking forward to China's commitment to finding the collective solution," he said.

Editor:Wang Chuhan |Source: China Daily

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