BRUSSELS (MNI) – The European Commission Thursday said that a
global effort was needed to boost the International Monetary Fund’s war
chest and that it thought an agreement could be reached at a February
meeting of G20 finance ministers and central bank governors.

Strengthening the IMF “would send a very clear signal to markets
and would enhance the capacity of the IMF to fulfill its unique role in
dealing with systemic risks for all its members globally, not just
European members,” a spokesman for the Commission said.

“This effort must have a global dimension,” the spokesman said,
adding that “no region remains unaffected from the possible impact of
the debt crisis in Europe.”

Indeed, in its upcoming World Economic Outlook, to be published
next Tuesday, the IMF is expected to say that the Eurozone crisis is the
“principal reason” for a deterioration in global growth prospects,
Italy’s news agency Ansa reported today.

According to Ansa, the IMF has sharply downgraded its growth
forecasts for the whole world, and for most major economies. It now
expects the Eurozone economy to contract by 0.5% this year, a downward
revision of 1.6 percentage points from its September forecasts, Ansa
reported.

With regard to bolstering the IMF’s financial firepower, the
Commission spokesman said, “we would warmly welcome contributions from
other G20 countries, in particular the financially strong members of the
IMF.”

The IMF on Wednesday said that it wanted its members to provide an
additional $500 billion to help it combat fiscal crises that it
estimated could spark demand for up to $1 trillion in bailouts over the
next two years. It is understood that the lion’s share of that money
would go to Europe.

Eurozone countries agreed last December to provide the IMF with an
additional E150 billion euros and other EU members are expected to
contribute additional funds, but the IMF’s largest shareholder, the
United States, is opposed to the move. It thinks Europe should deal with
its own problems.

China and Brazil support the cash call, but some EU officials are
worried about political concessions that China in particular might seek
to extract.

The Commission spokesman said, nevertheless, that he thought it
would be “achievable to finalize an agreement” at the meeting of G20
finance ministers and central bank governors taking place in Mexico City
on February 25-26.

–Brussels bureau: +324-9522-8374; pkoh@marketnews.com

[TOPICS: M$$CR$,MGX$$$,M$X$$$]