Lagarde: G-20 May Boost IMF for Europe Crisis

By Sandrine Rastello and Raymond Colitt - Dec 2, 2011 3:58 AM GMT+0700

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Dec. 1 (Bloomberg) -- Bradley Rogoff, head of U.S. credit strategy at Barclays Capital Inc., talks about yesterday's move by the Federal Reserve and five other central banks to cut the cost of emergency funding for banks outside the U.S. in a bid to ease Europe's sovereign debt crisis. He speaks on Bloomberg Television's "InBusiness with Margaret Brennan." (Source: Bloomberg)

The head of the International Monetary Fund (IMF) Christine Lagarde gestures at a press conference in Beijing. Photographer: Peter Parks/AFP/Getty Images

International Monetary Fund chief Christine Lagarde said Group of 20 nations are prepared to boost the fund’s resources as the European debt crisis threatens the global recovery.

“If circumstances require, the G-20 will commit the resources that are necessary for the IMF to play its systemic role,” she said during a joint press conference with Brazilian Finance Minister Guido Mantega in Brasilia today. “That gives you a range that is almost without a cap, without a limitation.”

Lagarde has indicated that the $390 billion the IMF currently has available for lending may not suffice should the global outlook worsen. The Washington-based lender to nations will probably cut its global growth forecast next month as the European crisis roils financial markets and slows output, spokesman Gerry Rice said.

European finance ministers said this week they would seek a greater role for the IMF alongside their own bailout fund in their bid to tame the euro region’s sovereign debt turmoil. G-20 leaders last month balked at writing new checks before Europe did more to fix the two-year old crisis.

Mantega reiterated his country’s willingness to make a contribution to boost the IMF’s war chest, depending on continuing changes to give emerging markets more say at the institution. An amount hasn’t been decided, he said.

Mexico’s Stance

Mexico yesterday also indicated it may contribute. Agustin Carstens, the central bank governor and Lagarde’s rival in getting the IMF top job earlier this year, told reporters his country would be “more than willing to collaborate and offer resources to support a greater range of action” by the fund.

Brazil, Russia, India, China and South Africa, the so- called BRICS nations, may gain a “big role” in the IMF if they provide aid to the euro region, said Thomas Mirow, who heads the European Bank for Reconstruction and Development.

“This is an ongoing trend, that the emerging economies and countries need to get a big role at the IMF, and of course if there would be a necessity to get additional funding for the IMF for Europe, that would probably accelerate this process,” Mirow said in a phone interview yesterday from London.

IMF members a year ago approved a plan to make China the third-strongest voice in the organization while weakening Europe’s influence. Emerging markets, including Brazil, have been asking for a change to the formula the IMF uses to calculate voting rights.

Lagarde repeated the IMF will make sure it can help countries outside of Europe, even as it co-finances bailouts in Greece, Portugal and Greece and prepares to send a team to Italy for an unprecedented audit of the country’s efforts to cut its debt.

On her first trip to Latin America since she took the IMF helm in July, which included visits to Peru and Mexico, Lagarde discussed the risks for the region of the European crisis as well as potential member support to help contain Europe’s mounting debt problems.

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Raymond Colitt in Brasilia newsroom at Or rcolitt@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; Joshua Goodman at jgoodman19@bloomberg.net