The world’s economic powers won’t consider pumping more money into the International Monetary Fund until Europe puts up more cash to battle its own problems, Lael Brainard, undersecretary of the Treasury for international affairs, said ahead of key meetings in Mexico this weekend.
The United States has already said it won’t contribute to an IMF effort to raise $500 billion from its members as a precaution in case problems in the euro zone intensify into a broader global crisis.
Brainard, in comments Wednesday, appeared to take the U.S. position a step further, saying she “doesn’t see the need” for an increase in IMF financial resources. The United States is the fund’s major shareholder.
European officials have not settled on how much they will put into their regional crisis-fighting fund, an issue they are set to debate further in March. Given the region’s wealth, U.S. and other officials argue that the euro nations can largely take care of their own problems — and should not rely too heavily on the IMF or other outside help.
“What is going to matter is the signal commitment by euro-area members . . . standing up a firewall which has the requisite resources and the requisite capabilities,” Brainard said. “That’s the critical issue. The IMF can come behind as a second line of defense.”
Her comments all but rule out a decision on IMF funding when finance ministers from the Group of 20 major economic nations meet in Mexico this weekend.
It also sustains the pressure that the United States has been applying for months on European leaders to put together a large and flexible enough crisis fund — or “firewall” — to ensure that large nations such as Italy or Spain can borrow the money they need on international markets and not resort to an emergency bailout.
While she said that European leaders seem close to putting Greece on a “sustainable path” with the bailout plan approved this week, central issues such as the size of the regional crisis fund remain unresolved.
European leaders are considering steps that would boost the size of the fund to about $1 trillion. They are due to debate the matter next month.