Countries from China to the U.S. may be willing to support Europe through the International Monetary Fund if the region’s policy makers agree on a plan to stem their debt crisis, World Bank President Robert Zoellick said.
The 17-nation euro region is “at a tipping point,” Zoellick said, with the turmoil affecting the U.S. as well as developing economies. The IMF can help “backstop the European system” as countries such as Italy adopt new policies to reassure investors, he said.
“If the Europeans do come together with a solution,” he said, then developing countries as well as Australia, Canada and the U.S. “would be willing to back it,” Zoellick said on Bloomberg Television’s “Conversations with Judy Woodruff,” airing this weekend. “The way they would back it is through the IMF.”
The Washington-based IMF is co-financing bailout programs in Greece, Portugal and Ireland and is about to start an unprecedented audit of Italy’s efforts to cut its debt. Some emerging markets, including Brazil, have indicated they are ready to help increase the resources of the IMF, which Managing Director Christine Lagarde has said may not suffice at current levels should the global outlook worsen.
China is also among countries that would be willing to chip in through the IMF if Germany, France and others unite on measures to stop the crisis, Zoellick, 58, said in the interview conducted yesterday. The U.S., while not putting money in, can be supportive through liquidity mechanisms at the fund, the World Bank chief said.
European policy makers are looking beyond their borders to help more than double the size of their 440 billion-euro ($592 billion) rescue fund to 1 trillion euros. The BRICS group of emerging economies, comprising Russia, China, Brazil, India and South Africa, discussed aid for the euro region earlier this month at the Group of 20 summit in Cannes, France.
U.S. Treasury Secretary Timothy F. Geithner said on Nov. 15 that the IMF can give advice on shaping reform plans, assess progress and “provide some financial assistance” while its financial role in Europe “will be supplementary, more limited.”
As investors call for more urgent action, France and Germany are clashing over whether to deploy the European Central Bank as a crisis backstop.
The U.S. administration, in discussions with lawmakers, “will want to make sure that actually the taxpayer isn’t doing a bailout of Europe,” Zoellick said. “And I think the mechanisms through the IMF and others certainly can do that.”
The Treasury Department is also requesting about $587 million from Congress over five years to fund the U.S. share of a capital increase at the World Bank. Zoellick said he was “cautiously optimistic” the money will be approved.
“What it really comes down to now is whether the United States wants to keep its shares, whether it wants to keep its veto right, whether it wants to keep its authority,” Zoellick said.
Zoellick, who took his job at the Washington-based lender in July 2007, said the bank is working on the fallout of the European debt turmoil in regions such as the Balkans, where trade finance is drying up. It’s also looking into how North African countries might be affected, he said.
A veteran of three Republican administrations, Zoellick said he works closely with the Obama administration and cannot be involved in politics in his current job. With his term ending at the end of June next year, he said he has to decide whether he will want to stay in his position.
“What I’ve told the shareholders, including the U.S. government, is that some time by the end of the year I’ll try to make my determination,” he said. “So that if I decide not to stay people have a good half year to be able to decide who the successor would be.”