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IMF pledges action amid global concern on EU crisis
The International Monetary Fund pledged firm collective action Saturday as warnings surged from around the world over a possible European economic meltdown.
With calls for the European Union to move coming from all sides -- including China, the United States, Brazil and a host of fragile poorer countries -- the IMF said that Europe's leaders would take whatever action is needed to prevent the current debt crisis from escalating.
But worries remained that moves to fix fiscal deficits in Europe and the United States were already hurting the rest of the world, with surplus liquidity fueling food and oil price increases and market volatility, and spending cuts choking off growth, investment and trade.
And it was hardly clear whether the second statement by the world's top financial officials on the eurozone crisis in two days would head off more panic in markets, which have plunged since July on worries over the advanced economies.
Acknowledging that Europe is the focus of the current crisis, the IMF's policy board said it had agreed to act decisively " to restore confidence and financial stability, and rekindle global growth."
" Euro-area countries will do whatever is necessary to resolve the euro-area sovereign debt crisis and ensure the financial stability of the euro-area as a whole and its member states," the board said.
IMF chief Christine Lagarde, on the firing line two months after being unexpectedly drafted from her job as French finance minister to lead the global emergency lender, insisted that the world's top financial officials were serious about facing the crisis.
" There was no denial, no finger-pointing," she said of the meeting of the IMF's powerful International Monetary and Finance Committee.
IMFC chairman Tharman Shanmugaratnam said " There was not just individual resolve, but a collective resolve that we will do what it takes to prevent an escalation of the crisis."
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It was an echo of late Thursday's surprise statement by the G20 group of developed and industrial economies following a particularly violent one-day plunge in global markets.
" We are taking strong actions to maintain financial stability, restore confidence and support growth," they said.
All week, calls came in from government and finance leaders -- including members of the G20 -- for eurozone leaders to move decisively and in unison to prevent Greece from defaulting on its debt and to shore up weak banks.
Chinese central bank governor Zhou Xiaochuan told the IMFC that " the sovereign debt crisis in the euro area needs to be resolved promptly to stabilize market confidence."
US Treasury Secretary Timothy Geithner warned that markets were moving faster than Europe's leaders, and said they were depending too much on the European central bank to handle the problem.
While there were many ideas floated on what Europe needed to do, Germany and France, as well as Lagarde, insisted that they would stick to the July 21 package of new money for Greece and a broadening of the scope of the emergency European Financial Stability Facility.
" We in Europe are generally on the right path, especially we in Germany," German Finance Minister Wolfgang Schaeuble insisted in Washington.
" We are hand in hand with Germany to implement the July 21 agreement, not to move away from this strategy," French Finance Minister Francois Baroin said.
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But there was still clear widespread nervousness over two coming hurdles:
- whether Greece can satisfy the IMF and EU that it is implementing austerity reforms enough to earn another eight billion euro handout that will allow it to avoid default, and
- whether the parliaments of the 17 members of the eurozone will ratify the July 21 pact by mid-October as targeted, to allow the new financing for Greece and for banks to get underway.
Greece wants to stay in the eurozone, and the other members want it to stay, Schaeuble said.
" If the necessary measures (by Greece) will be taken, we'll do everything to make that happen," he added.
