IMF chief calls on US for more ‘firepower’
International Monetary Fund Managing Director Christine Lagarde listens as US President Barack Obama speaks during the American Society of Newspaper Editors (ASNE) Convention on April 3, 2012 in Washington, DC. AFP PHOTO/JIM WATSON
WASHINGTON–IMF managing director Christine Lagarde implored the United States to help back-stop debt-ridden European countries Tuesday, wading neck-deep into bubbling US political waters.
Speaking in the US capital, Lagarde said the 187-nation International Monetary Fund needed more firepower to tackle financial crises raging around the globe, arguing it was in the US interest to pitch in and help Europe.
“Americans might ask themselves: why should what happens in the rest of the world concern us? Don’t we have our own problems?” she said, according to prepared remarks.
“The answer is simple: In today’s world, we cannot afford the luxury of staying in our own mental backyards.”
“If the European economy falters, the American recovery and American jobs would be in jeopardy. So America has a large stake in how Europe fare — and how the world fares.”
Lagarde’s comments came 64 years to the day after president Harry Truman signed the Marshall Plan, an unprecedented loan to rebuild post-war Europe.
But her comments will be anathema to politicians in Washington, as the country hurtles toward elections this November.
US officials, including Treasury Secretary Timothy Geithner, have for months trod a thin line between supporting the IMF’s efforts to bolster its resources and actually kicking in some more cash.
Washington has yet to ratify 2010 reforms which would see it send $63 billion more to the IMF’s coffers, under a new quota agreement.
With the United States itself mired in high levels of debt, increasing IMF funding or shipping tens of billions of dollars abroad to help Europe could be tantamount to political suicide.
Unperturbed, Lagarde said Europe’s recent efforts to shore up its own financial “firewall” must prompt the rest of the world to pitch in.
“The Europeans have moved first with their firewall, the time has come to increase our firepower,” she said.
“The ratio of Fund quotas to world GDP is significantly lower today than in the past. Sixty years ago, it was as much as three, four times higher. We’ve a lot of ground to make up.”
Lagarde has asked members to give her $500 billion in extra funds to fight financial crises, including for possible future eurozone bailouts.
But at a fraught meeting of finance ministers and central bank chiefs in Mexico City in February, Group of 20 economies said they would only boost IMF funding if the eurozone first put its hand in its pocket.
After a month of wrangling and some German resistance, the eurozone Friday clinched a deal it claimed was worth more than one trillion dollars, putting the ball back in the IMF’s court.
Trying to seal the deal, Lagarde echoed a point frequently made by Geithner: that the IMF offers a solid bet.
“The IMF is a good investment for all our members, including the United States. Your money is not drawn upon until needed. Your money earns interest. Your money is used prudently — our programs always carry rigorous conditions to ensure their effectiveness,” she said.
“No member country has ever lost money by contributing to IMF resources — and I assure you that will not change on my watch.”
Lagarde added that the global economy is looking better, but said the recovery is still very fragile.
