Spain calls for IMF reforms amid financial crisis

31st March 2009, Comments 0 comments

Spain calls for IMF to reform its structure and operations, and for developing nations to play a greater role at the body.

MADRID – Spanish Prime Minister Jose Luis Rodriguez Zapatero told the visiting head of the IMF on Monday the body should be reformed to be better able to respond to the financial crisis, the government said.

"Spain feels it is necessary to revise the instruments of the International Monetary Fund so that this body has a greater capacity to provide liquidity to its members in case of a noticeable interruption of capital flows," it said in a statement.

Zapatero outlined Madrid's proposals for reform of the "structure and operation" of the IMF to its chief, Dominique Strauss-Kahn, saying they aimed to give the body more "legitimacy".

Madrid wants voting rules and the selection process for the heads of the Washington-based body to be reformed. It is also calling for developing nations to be given a greater role at the IMF.

The meeting between Zapatero and Strauss-Kahn comes ahead of Thursday's G20 summit of developed and developing economies in London which is expected to focus on proposals for reform of the 65-year-old institution.

Spain has been invited to the gathering even though it is not a member of the G20 because its economy is among the 10 largest in the world and its banks are in relatively good shape by global standards, thanks in part to tight regulation.

Unlike in Britain and other European countries, no bank has been formally nationalised in Spain because of the global financial crisis.

But Spanish banks are facing a rapid rise in non-performing loans as unemployment swells following the collapse last year of a decade-long property boom that had been a key driver of economic growth.

The Bank of Spain began the country's first bank rescue since the crisis began on Sunday, providing up to EUR 9 billion in liquidity to regional savings bank Caja Castilla La Mancha and replacing its directors with central bank nominees.

The IMF is seeking hundreds of billions of dollars to meet an expected rise in demands from its 185 members and to instil confidence in the tottering financial system.

It hopes to at least double its lendable resources to more than USD 500 billion (EUR 376 billion). G20 finance chiefs backed the idea in March.

The IMF already has lent more than USD 50 billion to help crisis-affected countries and is in talks with more.

AFP / Expatica

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