At this weekend’s G20 meeting, European countries are likely to press for an increase in the International Monetary Fund’s resources as a means to bolster the firewalls against the eurozone debt crisis. The other G20 members must resist such pressure until Europe starts showing more signs that its getting its act together.
The balance sheet of the IMF is already heavily exposed to the eurozone crisis. Greece, Ireland and Portugal combined account for almost 60 per cent of outstanding loans. And this is before the fund participates in the new bail-out for Greece that was announced earlier this week.
The continued pressure on the IMF is also unfortunate given that Europe does not lack financial resources. Europe’s problem is not a lack of financing, but deep divisions about how the eurozone should operate in the presence of very different initial economic, financial and socio-political conditions among its member countries. This is an internal issue that the IMF cannot, and should not be expected to, solve. Continue reading »