The International Monetary Fund is ready to help the euro area battle its debt crisis while setting aside enough resources to help countries outside the region, Managing Director Christine Lagarde said.
“The IMF will be available, will stand ready, will participate as part of its mission in the current crisis but not exclusively to the benefit of the euro zone,” Lagarde told reporters in Mexico City today. “It will have to be attentive and will have to spare resources for those countries that are the bystanders of the crisis.”
The Washington-based IMF is co-financing bailouts to Greece, Portugal and Ireland and is preparing to send a team to Italy for an unprecedented audit of the country’s efforts to cut its debt. European finance ministers said this week they would seek a greater role for the IMF alongside their own bailout fund in their latest gamble at taming the euro zone’s sovereign debt turmoil.
Lagarde has said that the $390 billion the IMF currently has available for lending may not suffice to meet loan demand should the global outlook worsen. The new-found wealth of Mexico and Brazil, where she will be tomorrow, could help boost the fund’s war chest. Group of 20 nations’ leaders this month stopped short of pledging more funds because the Europeans hadn’t given enough details on how they would fight their crisis.
“Mexico, as member of the G-20, will be more than willing to collaborate and offer resources to support a greater range of action” by the IMF, central bank chief Agustin Carstens said during the same press conference.
Still, the boost may not be imminent.
Brazil, which has indicated over the past weeks it is ready to help Europe through the IMF, will not pledge extra resources during Lagarde’s visit, finance ministry official Carlos Cozendey said today, adding that the matter would be discussed at a G-20 meeting in February.
European ministers in Brussels turned to the IMF after conceding that higher interest rates and lower appetite for European bonds made it impossible for the bailout fund, the European Financial Stability Facility, to be leveraged up to its 1 trillion euro ($1.3 trillion) target.
Europe should devote more of its resources to tackle its crisis before seeking additional funding from the IMF, Canadian Finance Minister Jim Flaherty said in a Bloomberg Television interview in New York today.
Lagarde told reporters today that “timing is of the essence” to solve the current turmoil and welcomed today’s coordinated move by six central banks to make it cheaper for banks to borrow dollars in emergencies.
The IMF “is particularly pleased to see in numerous countries of the euro zone a determination to address the root causes of the crisis and to proceed with the necessary adjustments that are required to restore the confidence that is currently needed and that has been lacking recently,” she said.
She reiterated that the fund has had “no discussions whatsoever with Italy and Spain” to negotiate financial aid.
With a new credit line created last week, the IMF is well equipped to help countries that are hit by shocks without being at the core of the crisis, she said.