Bloomberg News

IMF Shouldn’t Do Much More for Europe, Canada’s Flaherty Says

October 14, 2011

(See {EXT4 <GO>} for more on the debt crisis and {GMEET <GO>} for news from the G-20 meeting.)

Oct. 14 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said the International Monetary Fund shouldn’t be asked to do much more to resolve the debt crisis in Europe, which has enough resources to tackle the problem.

Discussions on increasing assistance from the IMF threatens to distract European officials from the central problem of putting together plans to resolve the sovereign-debt crisis and recapitalize their banks, Flaherty said in an interview with Bloomberg TV in Paris, where he is attending a meeting of policy makers from the Group of 20 countries.

“The European situation is a problem for the euro zone to sort out and the euro zone has adequate tools and adequate resources to get the job done,” Flaherty said. “I don’t think we ought to be asking the IMF to do a great deal more.”

Countries from China to Brazil are considering increasing lending resources for the Washington-based IMF to help stem Europe’s travails, G-20 and fund officials said.

Policy makers are discussing an expansion of the IMF’s firepower as part of a global G-20 agreement next month in Cannes, France, according to three officials who declined to be named because the discussions aren’t public.

‘Meat on the Bones’

IMF Managing Director Christine Lagarde said last month that her current $390 billion cash pile may not be large enough to meet all loan requests should the global economy worsen.

European leaders need to put “meat on the bones” of their proposal to shore up the region’s banks by indicating the size of any bailout and indentifying the lenders affected, Flaherty said. Europe must also come up with a specific plan to restructure Greek debt, Flaherty said.

China’s reluctance to allow more flexibility in its currency has been a “persistent thorn,” Flaherty said, adding that a move in this direction would be in the Asian country’s interests.

“There needs to be a recognition that flexibility of the currency also benefits China,” Flaherty said. “Inflexible currencies endanger free trade, ultimately, because they lead to protectionist sentiment.”

--Editor: Patrick G. Henry

To contact the reporters on this story: Theophilos Argitis in Paris at targitis@bloomberg.net; Maryam Nemazee in Paris at mnemazee@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net


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