IMF needs more money to stabilise financial markets
The eurozone crisis has escalated to the point where it is now a "systemic" threat to the global financial system, one expert warns.
- (1888PressRelease) January 24, 2012 - Speaking to the BBC World Business Report, Domenico Lombardi from the Brookings Institution believes that the International Monetary Fund (IMF) is therefore "bound" to step in and try to restore balance.
However, Mr Lombardi, who formerly held a place on the IMF board, believes the group's members - including Britain - will need to contribute more to the IMF. He claims that it currently has $380bn available - not enough to cover the funding needs of the Italian treasury for a year.
"Therefore the issue is how to equip the IMF to make it a more significant stabilising player in the Euro area. For this to occur, IMF member countries ought to provide additional resources," Mr Lomabrdi explained.
Due to the globalised nature of the financial markets, all major economies will experience damaging knock-on effects from a eurozone collapse. Emerging economies such as Brazil and China could therefore be urged to increase their IMF contributions, further strengthening their position in the financial world.
Yet the IMF itself is keen for governments to do more with their policies for growth.
In a statement featuring IMF Head Christine Lagarde, World Bank President Robert Zoellick and a number of other influential figures as signatories, world leaders were urged reduce barriers to trade, protect economic growth and introduce systemic reform to their economies.
Governments were also warned about their austerity programmes, saying that they should "promote rather than reduce prospects for growth".
"Rising inequality calls for heightened consideration of more inclusive models of growth. We must deliver tangible improvements in material living standards and greater social cohesion," the statement continued.
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