Mexican President Felipe Calderon urged the Group of 20 nations to gather more funds to prevent the European debt crisis from destroying the euro and undermining stability elsewhere in the world.
“We have a time bomb, the bomb is in Europe and we are working together to deactivate it before it explodes over all of us,” Calderon said in a speech yesterday at the World Economic Forum in Davos, Switzerland.
The more money committed to a “firewall,” the less the crisis will cost in the long run, preventing countries such as Italy moving from the current liquidity shortage to a solvency problem, he said.
Calderon called for more nations to raise funding for the International Monetary Fund. The IMF proposed last week to lift its lending capacity by as much as $500 billion to insulate the world against any worsening of Europe’s debt crisis. Mexican policy makers have pushed for greater support for the fund through its current presidency of the G-20.
“The failure of a containment strategy will mean not only the potential implosion of the euro, but an economic crisis with devastating consequences for the rest of the world,” Calderon said. With insolvent nations needing “huge” support, “this is a task for all of us in the G-20,” he said. “We need to use a bazooka right now to protect Italy.”
On Dec. 12, the IMF said it still lacks the necessary votes to implement a 2010 decision to double its permanent resources and boost the voting power of emerging markets. The U.S. Congress is one of the legislatures that has yet to approve the measure.
“We decided to increase our participation and our contribution to the IMF in order to strengthen that very important international institution, and Brazil is doing exactly the same, and China,” Calderon said. “I hope the United States, the American Congress, could decide quickly to support the IMF.”
The international lender needs additional funds to deal with the consequences of the European debt crisis for other countries outside of the region, Mexico’s central bank Governor Agustin Carstens told reporters in Davos yesterday.
“It’s an important effort and Mexico will be consistent with our conviction that the fund needs to be strengthened,” he said.
Canadian Finance Minister Jim Flaherty said Europe can solve its debt crisis without new IMF aid that would come at the expense of much poorer citizens in other countries.
“These are the wealthiest countries in the world, and you can’t expect a Chinese peasant earning $200 a year to contribute to bailing out Europe,” Flaherty said yesterday in an interview at the World Economic Forum in Davos, Switzerland, on “Bloomberg Surveillance” with Tom Keene. “It doesn’t make any sense.”
Not everybody in Europe said the economy is slipping into crisis. Barclays Plc (BARC) Chief Executive Officer Robert Diamond and Deutsche Bank AG’s Anshu Jain said investor optimism is growing in 2012, as the European Central Bank provides unlimited loans to the region’s lenders.
“We are seeing a big change driven by somewhat more confidence in the U.S. economy and, most importantly, that Europe is on the right path,” Diamond said in an interview with Bloomberg Television at Davos yesterday.
“We are beginning this year on a mildly better note than the one we finished on in the fourth quarter,” Jain, who takes over as co-CEO of Frankfurt-based Deutsche Bank at the end of May, said in an interview yesterday.
Both Citigroup Inc. CEO Vikram Pandit and Christian Meissner, Bank of America Corp.’s co-head of global corporate and investment banking, also said the mood among investors in Europe has improved.
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