IMF inches toward deal on boosting bailout funds
By Lesley Wroughton and Glenn Somerville
WASHINGTON (Reuters) - The International Monetary Fund appeared to be inching toward a deal on increasing its financial firepower on Tuesday, with Japan, Sweden and Denmark committing a total of $77 billion to help contain the euro zone's debt crisis.
The pledges were made ahead of meetings of global finance chiefs in Washington this week that will focus on additional funds for the IMF, an issue that has taken on fresh urgency, given a jump in borrowing costs in Spain and Italy this week.
Their renewed borrowing woes have reignited fears that the euro-zone crisis is about to flare again.
While a deal may not be fully fleshed out by the time the meetings wrap up on Saturday, it is possible that the G20 developed and emerging nations could agree on the amount of funds needed and leave it to a leaders' summit in Mexico in June to hammer out details.
In an interview with Reuters, German Finance Minister Wolfgang Schaeuble played down concerns that Spain could be the next euro-zone country to seek a bailout. He expressed optimism that the G20 will increase IMF resources by $400 billion by the time the meetings conclude.
U.S. Treasury Under Secretary Lael Brainard said Europe must commit to do whatever it takes to address its debt problems, but should be careful to avoid a "downward spiral of austerity and recession." She reiterated that Washington has no intention to throw more money in the IMF's pot.
A number of emerging market economies, including China, Brazil and Russia, are also being cautious about ponying up money, although the funds would be designated to help countries outside of Europe. These economies want firm commitments that any new resources will be accompanied by more voting power in the global lender.
They have been frustrated with the slow pace of governance reforms. The United States is holding up approval of vote reforms agreed in 2010 that would make China the IMF's third-largest shareholder and boost voting shares for Brazil and India. Negotiations have already begun on the next stage of voting reform, which is expected to be completed in 2013. Continued...