G20 will keep IMF well-funded in hint of larger role in euro zone crisis

G20 will keep IMF well-funded in hint of larger role in euro zone crisis

GABRIELE STEINHAUSER

PARIS— The Associated Press

Published Saturday, Oct. 15, 2011 10:16AM EDT

Last updated Saturday, Oct. 15, 2011 9:32PM EDT

The finance chiefs of the G20 rich and developing nations said Saturday that they will make sure the International Monetary Fund has the resources it needs to help stabilize the world economy.

That commitment is a hint that the world's leading economies may be open to a larger role of the IMF in the euro zone debt crisis — and if necessary increase its resources.

“We committed that the IMF must have adequate resources to fulfil its systemic responsibilities,” finance ministers and central bank chiefs from the G20 said in a statement after a two-day meeting in Paris.

They said they would discuss the question of IMF funding at a summit of G20 leaders in Cannes, France, in early November.

Earlier in the day, officials said several countries, including the U.S., were still resisting an increase in the IMF's resources.

As the debt troubles in the euro zone threaten to spin out of control — with potentially global consequences — France and some other countries have pushed for the IMF to help Europe keep the crisis from spreading to large economies such as Italy and Spain.

Until now, the IMF has funded about a third of the bailouts of Greece, Ireland and Portugal, but helping the euro zone to stem contagion would require a broader use of resources, such as buying bonds on the open market, that go far beyond the fund's traditional role of providing rescue loans to cash-strapped countries.

A precondition to any expansion of the IMF's role is for the euro zone to take more radical action on stemming the crisis at a summit on Oct. 23.

At that meeting in Brussels, the currency union's leaders are expected to sign off on a scheme to maximize the impact of their $608-billion (U.S.) bailout fund, a plan to recapitalize banks across the continent to ensure they can withstand worsening market turmoil and a second bailout for Greece.

U.S. Treasury Secretary Timothy Geithner still seemed hesitant on giving more money to the IMF, he appeared to support an expanded role for the fund.

“The members of the G20 have a strong interest in supporting Europe, and we will continue to do so through the IMF,” Mr. Geithner said. However, he stressed that the fund “has a substantial arsenal of financial resources,” adding that the U.S. supported further use of “those existing resources” alongside boosted European efforts.