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The International Monetary Fund said it would seek up to $US500 billion in new financial firepower as the European debt crisis increasingly threatens the global economy, according to the Sydney Morning Herald.

With several European countries veering on recession and Greece on the brink of default, the IMF said it lacks the resources to be the planet’s lender of last resort.

“Based on staff’s estimate of global potential financing needs of about $US1 trillion in the coming years, the Fund would aim to raise up to $US500 billion in additional lending resources,” it said in a statement.

The World Bank yesterday signalled a downturn so severe it would eclipse the chaos that followed the collapse of Lehman Brothers in 2008. Deloitte Access Economics director, Chris Richardson, said if there was not a sharp turnaround overseas.

”If we get a re-run of last time, you get higher unemployment, sharp hits to company profits and a slowdown in the Australian economy without a technical recession, largely due to the momentum in the big mining construction projects,” he said.

The IMF said the $US500 billion includes the recent European commitment to add about $US200 billion to its resources.

“At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations with the Fund’s membership have been completed,” the 187-nation institution said.

The United States, the biggest stakeholder in the IMF, reiterated that it would not ask Congress to boost the IMF’s war chest.

“We continue to believe that the IMF can play an important role in Europe, but only as a supplement to Europe’s own efforts,” Treasury spokeswoman Kara Alaimo said in an email to AFP.

“Europe has the capacity to solve its problems. The IMF cannot substitute for a robust euro area firewall,” she said.

“We have told our international partners that we have no intention to seek additional resources for the IMF.”

The IMF funding statement followed an executive board meeting Tuesday to discuss the adequacy of its resources — currently about $US385 billion in available funds.

IMF managing director Christine Lagarde said Tuesday that the discussion was held at the request of the membership and the “general support” of the Group of 20 major economies.

Prodded last year by the Group of 20 major economies to increase the money it has for intervening in financial crises, the IMF has been exploring informally the issue for months.

Eurozone leaders pledged in December to provide the IMF with bilateral loans worth 150 billion euros ($US192 billion).

More at Sydney Morning Herald


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