Europe pushed by IMF to do more to help itself

Washington: The International Monetary Fund (IMF) is pressing Europe to commit another $500 billion (Dh1.836 trillion) to battle its financial crisis, putting the onus on regional giants such as Germany to use more of their own cash for the euro's rescue.

The move aligns the IMF with the Obama administration in insisting that Europe's crisis management remains inadequate, and that the region needs to do more to help itself. The money would add heft to an existing bailout fund, the European Financial Stability Facility.

Throughout the euro's now nearly two-year-old troubles, Germany and other better-performing nations have tried to limit how much of their own taxpayers' money is used to fight the crisis.

In high-level talks this week, agency officials estimated that a worsening of Europe's problems might require a response costing $1 trillion. This is money that could help nations within the Eurozone but would also provide a financial backstop for others around the world likely to suffer from declining economic growth, collapsing trade or a withdrawal of bank credit.

Additional IMF funding

In an e-mailed statement, the IMF on Wednesday said it would seek to raise about half of that from its members to help countries worldwide. That sum would include about $200 billion already pledged by European nations to the IMF. The amount would not necessarily represent paid-in contributions, but might be in the form of promised loans that could be drawn on only if the fund's existing resources are stretched. The IMF presently has about $390 billion available to lend. Details of the additional IMF funding are to be debated at upcoming meetings of the finance ministers from the world's major economies.

Officials familiar with the deliberations said fund officials and board members were clear that Europe should come up with the other $500 billion on its own. The debate among IMF board members stressed "the importance of European firewalls being sufficiently strong to respond to the crisis in the Euro Area," IMF Managing Director Christine Lagarde said in a written statement.

Skewed rescue plan

The push from the IMF for Europe to put more cash behind its crisis response highlights the region's ongoing inability to get ahead of a problem that has roiled world markets for two years now and has pushed the region toward a new recession. In an effort to contain the amount of local taxpayers' money put at risk in bailouts of Greece and other nations, Eurozone leaders created fear that they would not produce the funds needed to stand behind larger nations such as Spain and Italy.

European bond and stock markets have given some signs the crisis may be easing: Recent bond sales, for example, have produced lower rates than late last year.