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G20 chiefs hint at bigger IMF role in euro crisis
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Associated Press & CBC News-The Group of 20 finance chiefs have ended two days of talks in Paris by hinting they will support a larger role for the International Monetary Fund to help stop the spread of Europe's debt crisis, despite objections from Canada and other countries.
The G20 leaders of rich and developing nations issued a communiqué Saturday saying they will make sure the IMF has all the resources it needs to help stabilize the world economy.
"We committed that the IMF must have adequate resources to fulfill its systemic responsibilities," they said.
They said they would discuss the question of IMF funding at a summit of G20 leaders to be held in Cannes, France, in early November.
Canada wants IMF to focus on poorer countries
Canadian Finance Minister Jim Flaherty said the IMF has a role to play, working with the European Commission and the European Central Bank, to help resolve the sovereign debt crisis in Greece. But Flaherty said the global lending organization should not have an increased role "to use the resources of the world to bail out banks in a relatively rich part of the world."
"Our position is that the IMF probably needs more resources, but those resources would be needed to help out poorer countries in the world, not the European countries," Flaherty told CBC News on Saturday.
"There's already a contribution by the IMF to the facility that's being created to recap the banks in Europe, so our focus was on that. We focus on those countries that are in need, not on European countries that are relatively well off," he said.
G20 officials who spoke anonymously said the United States and Australia also objected to an expanded IMF role in limiting the crisis.
As the debt troubles in the eurozone threaten to spin out of control — with potentially global consequences — France and some other countries have pushed for the IMF to help Europe keep the crisis from spreading to large economies such as Italy and Spain.
Until now, the IMF has funded about a third of the bailouts of Greece, Ireland and Portugal, but helping the eurozone to stem contagion would require a broader use of resources, such as buying bonds on the open market, that go far beyond the fund's traditional role of providing rescue loans to cash-strapped countries.
A precondition to any expansion of the IMF's role is for the eurozone to take more radical action on stemming the crisis at a summit on Oct. 23.
At that meeting in Brussels, the currency union's leaders are expected to sign off on a scheme to maximize the impact of their $608-billion bailout fund, a plan to recapitalize banks across the continent to ensure they can withstand worsening market turmoil and a second bailout for Greece.
The IMF, the world's lender of last resort for cash-strapped countries, has funded about a third of the cost of the bailouts of Greece, Ireland and Portugal.
Concerns are now growing that larger economies, like Italy and Spain, could falter, likely sinking numerous European banks, dragging the eurozone into recession and sending shock waves through the world economy.
As a result, finding a way to help Greece dig out of its debts and prevent the crisis from spreading topped the G20 agenda in Paris this weekend.
Canada has 'huge vested interest'
In an interview with CBC's Peter Mansbridge, broadcast on Friday, Bank of Canada governor Mark Carney said European leaders need to take action or suffer a "severely impaired" financial system, adding that the crisis will likely have an effect on Canada.
"We're so interconnected in this globalized world," Carney said. "We have a huge vested interest in what happens in Europe."
Flaherty was also pressuring his European colleagues to move faster on measures to shore up the cash reserves of the biggest European banks.
"Quite frankly, at the end of the day, there's no choice. Doing nothing is not an alternative that will work," Flaherty said Friday.
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