Christine Lagarde: IMF may need billions in extra funding

Christine Lagarde has signalled that the International Monetary Fund (IMF) may   have to tap its members – including Britain – for billions of pounds of   extra funding to stem the European debt crisis.

Louise Armitstead and Jonathan Russell

8:04PM BST 25 Sep 2011

The head of the IMF has warned that its $384bn (£248bn) war chest designed as   an emergency bail-out fund is inadequate to deliver the scale of the support   required by troubled states.

In a document distributed to the IMF steering committee at the weekend, Ms   Lagarde said: “The fund’s credibility, and hence effectiveness, rests   on its perceived capacity to cope with worst-casescenarios. Our lending   capacity of almost $400bn looks comfortable today, but pales in comparison   with the potential financing needs of vulnerable countries and crisis   bystanders.”

The suggestion came after European officials revealed they were working on a   radical plan to boost their own bail-out fund, the European Financial   Stability Facility (EFSF), from €440bn (£384bn) to around €3 trillion.

The plan to increase the EFSF firepower is the crucial part of a three-pronged   strategy being designed by German and French authorities to stop the   eurozone’s debt crisis spiralling out of control. It also includes a   large-scale recapitalisation of European banks and a plan for an “orderly”   Greek default.

Although Britain is not involved in the large-scale eurozone bail-out   projects, it is liable for 4.5pc of IMF funding.


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