Pining for an IMF Solution, Europe Agrees to Feed Fund

(BobTuskin.com)

 

European leaders continue to look longingly to the International Monetary Fund to help resolve their crisis, not only for money but as an enforcer of tough conditions to be imposed on indebted euro-zone governments.

At their summit in Brussels Friday, the heads of European Union governments agreed—for the first time in this crisis—that their governments would send the IMF up to €200 billion ($267 billion) to bolster the fund’s resources, likely from national central banks in Europe.

The officials hope the contributions will draw money from others, including emerging markets such as China and Brazil, that have offered to help fight the euro-zone crisis—but only through the IMF.

The move, while seen by many nations outside Europe as a supportive gesture, isn’t a significant step toward addressing the core market fears about Europe.

One of those fears is that a major euro-zone economy could have trouble borrowing, but be too big for an IMF rescue program. A much larger bailout fund will be required to allay that worry, but the agreement Friday could reassure investors that the IMF can play a supporting role.

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