Brazil raises G20 stakesComment on this story
Brazil raised the stakes ahead of next week's Group of 20 summit on Tuesday by saying it may cap its contribution to a planned funding increase for the International Monetary Fund unless there are firm promises to give emerging markets more say at the international table.
While summit host Mexico urged Europe to quickly finalise details of aid for Spain's banks, Brazil said it might contribute less than it had planned to the extra $430 billion promised to the IMF by member states in April to help fund heavily indebted euro zone countries.
The euro zone sovereign debt crisis is set to dominate the June 18-19 G20 leaders' meeting in Los Cabos as it did the last summit in Cannes, France, six months ago. The meeting starts a day after Greek elections which could decide whether the country stays in the euro zone.
The G20, created in 1999 after the Asian financial crisis as a way to forge stronger links between developed and emerging economies, was promoted to be the No. 1 global policymaking body after the 2008 financial crisis but its authority has been undermined since as countries pursued their own domestic agendas.
Brazil made it clear it would use the meeting to insist on more say at the IMF. Voting power at the IMF is currently dominated by the United States and other developed powers.
“We are frustrated because we see that countries that know they will lose influence are resisting the (quota) formula,” said a senior Brazilian government official, who declined to be named to speak more freely. “The amount of additional resources remains open. It could be more than $10 billion or less.”
The European Union has said it would reduce the number of seats it holds on the IMF board by two in the autumn this year, but G20 sources who spoke to Reuters on condition of anonymity were pessimistic about a firm agreement by then.
China, India, Russia and Mexico are among countries yet to say how much they will commit to lend the IMF, although final pledges are due at the Los Cabos summit.
A European source said countries were waiting to see how much China would contribute and on what conditions. China is said to be considering a $60 billion pledge.
The so-called BRICS nations of Brazil, China, India, Russia and South Africa are due to meet privately on June 18, the Brazilian official said.
The IMF reform package be finalised through until the US Congress approves the move, something that is highly unlikely ahead of November elections because it would require the authorisation of additional funding for the IMF.
GROWTH ACTION PLAN
Although markets are sceptical about a deal by euro zone finance ministers last Saturday to lend Spain up to 100 billion euros ($125 billion) to recapitalise its banks, Mexican President Felipe Calderon said the move could mark an important step towards resolving the region's debt crisis.
“The decisions which were announced at the weekend ... really do open the door to finding a solution to the case of Spain and at the same time making an enormous step towards resolving Europe's economic problems,” he told reporters at a news conference in Mexico City. “I would argue for these proposals to be firmed up quickly.”
Calderon said the leaders aimed to come up with a Cannes-style action plan to support global growth, but did not elaborate on potential measures.
“(The action plan) will not only include measures to confront and resolve the European crisis, which is ultimately an economic crisis, but will also put forward concrete measures on public policy in key areas in the realms of tax, finance and monetary policy, which will help to boost global growth in the long term,” he said.
A European source said the plan might include commitments to roll back austerity budgets in certain countries, but it was too early for Europe to give specifics on its economic growth pact because of an EU summit on June 28-29.
There is a growing push in the euro zone, led by newly elected French President Francois Hollande, to do more to stimulate economic growth and not just focus on reducing fiscal deficits.
Hollande may well go into the G20 meeting with increased authority to push a growth agenda as his Socialist party is expected to win a parliamentary majority at a run-off vote on June 17.
Austerity advocates Germany, meanwhile, were keen to put some of the focus on other potential problem areas such as the planned combination of tax rises and spending cuts due to hit the United States later this year, dubbed the “fiscal cliff”.
“The euro zone will surely be a topic, but as Europeans we also want to talk about other themes related to the global economy that go beyond the euro zone, for example budget consolidation in the United States, currency flexibility in China and structural reforms in emerging markets,” a German the officials told reporters.
“We think when talking about global growth it is important to look beyond the euro zone, not to limit the discussion to Europe.”
German officials also made clear they wanted to separate a discussion over resources for the IMF and a debate on reforming voting powers in the global lender, putting Germany at odds with Brazil. - Reuters