Christine Lagarde, managing director of the International Monetary Fund, said she expects more contributions after landing pledges of about $320 billion in her campaign for bigger reserves to combat threats to global growth.
“I look at this pot of money as an umbrella,” Lagarde said Thursday on Bloomberg Television’s “InBusiness With Margaret Brennan” in Washington, before meetings of the world’s finance chiefs. “There are clouds on the horizon.”
Japan, Denmark and Switzerland are among the countries to rally this week to Lagarde’s call for a bigger lending capacity beyond the current $380 billion to shield the world economy against any deepening of Europe’s debt turmoil.
Having last month boosted their own defenses beyond $1 trillion, euro-area policymakers are counting on a reinforcing of the IMF to calm financial markets. Spain now sits in the crosshairs, with the yield on its 10-year bonds closing in on levels at which Greece, Ireland and Portugal required bailouts.
Between $400 billion and $450 billion is the “most realistic” end result, South Korean Finance Minister Bahk Jae-wan said in an interview in which he promised that his country would contribute “more than its fair share.” That marks a scaling back of the $600 billion first sought, reflecting demands for Europe to do more to fix its own woes and a refusal by the United States to chip in more money. The lending amount will be lower than the total amount raised because the IMF must keep some cash on hand.
Italian and Spanish 10-year bonds on Thursday led declines among Europe’s higher-yielding government securities amid concern that the crisis is worsening. The yield on Spain’s benchmark has jumped about one percentage point since the beginning of March as Prime Minister Mariano Rajoy struggles to meet budget-deficit targets.
“The toolbox is much bigger and I hope they can address the Spanish issues together with the Spanish government,” Lagarde said. “If there’s a need, the IMF has to be there for all members.”
The United States, the IMF’s largest shareholder, is refusing to offer more cash, in part because of skepticism that Europe has done enough, the view that the IMF has substantial resources already and reluctance to seek more money from Congress in an election year.
Treasury Secretary Timothy F. Geithner on Wednesday called for “a clean and unequivocal commitment” by European policymakers to ensure that countries can borrow at sustainable interest rates, noting they had “put in place a stronger set of tools for managing this crisis.”
China is still willing to discuss means for funding the IMF with member countries, Foreign Ministry spokesman Liu Weimin said at a briefing in Beijing on Thursday.