The U.S. Treasury’s top international official said discussions at the International Monetary Fund meetings this weekend will focus in part on the challenges Europe faces and efforts to mitigate the crisis.
“We will continue to engage with our European partners to ensure that they are alert to ongoing risks and prepared to work together to help support countries as they implement reforms to navigate these difficult trade-offs between austerity and growth,” Lael Brainard, the Treasury Department’s undersecretary for international affairs, said at a press briefing in Washington today.
Europe’s two-year debt crisis reignited this month as Italian borrowing costs rose and Spain’s 10-year bond yield approached the level at which Greece, Ireland and Portugal required bailouts. The IMF, which is seeking to boost its lending capacity from around $380 billion to shield the global economy from the European crisis, garnered fresh pledges of cash from Japan to Denmark.
“The U.S. will continue to support our euro area partners, through “central bank swap lines,” Brainard said. “We do not intend to seek additional IMF resources.”
Spain’s central bank chief today said the country risks missing deficit estimates unveiled last month just hours after a successful bill sale dissipated some concerns that the government may have to seek a bailout. Bank of Spain Governor Miguel Angel Fernandez Ordonez told a parliamentary committee today that uncertainty over the deficit goal hurt confidence.
In the U.S., the recovery “continues to gather strength despite adverse shocks,” Brainard said. Still, “sharp increases in oil prices” present a risk.
The process of correcting the misalignment of China’s exchange rate remains incomplete,” and the U.S. will discuss the exchange-rate at the IMF spring meetings, Brainard said.