He quickly retracted the notion, noting that the IMF is — and plans to remain — in the business of lending directly to governments, not intervening in securities markets.
European officials are divided over whether new capital requirements should be issued by national regulators on a bank-by-bank basis or imposed regionally as a way to undergird the whole system at once. They also differ on whether additional capital should come from private investors, banks’ profits or governments. Added capital also could come from the new European Financial Stability Facility that is being set up in response to the debt crisis.
The discussion took on added import this week when France and Belgium had to pledge new support for the Brussels-based Dexia bank.
The troubled Franco-Belgian institution has made extensive loans to governments suffering financial troubles — including Greece, Italy, Spain, Portugal and Ireland.
International investors, including U.S. money market mutual funds, have pulled out of the European bank market over concerns about the health of the system. Banks in Europe have stopped lending to one another over concerns about each institution’s ability to repay even the routine short-term loans that keep the financial system lubricated with cash. That tightening in credit is constricting the region’s already slow growth.
In Britain on Wednesday, Prime Minister David Cameron told a Conservative Party convention that he thought the looming economic threat was as dangerous now as it was three years ago. He said that he did not plan to slacken his country’s austerity measures even though economic growth has been weaker than expected.
The British Office for National Statistics said Wednesday that second-quarter growth in the country had been nearly flat. The economies of other major countries, including France and Germany, have also been sputtering in recent months.
Britain is not part of the 17-nation euro currency zone, having chosen to maintain the pound sterling.
“The threat to the world economy — and to Britain — is as serious today as it was in 2008 when world recession loomed,” Cameron said.
Schneider reported from Washington.