Spain to call for strengthened IMF at G20 meeting

5th March 2009, Comments 0 comments

Spain will seek for more resources to be allocated to the International Monetary Fund so it can better fight the global downturn, according to a document.

MADRID – Spain will call for the International Monetary Fund to be given more resources to better fight the global downturn at next month's Group of 20 summit, according to a document seen Wednesday.

"The resources of the International Monetary Fund should be reinforced to protects its role as the lender of last resort," the document said, adding that the "size of the IMF has diminished significantly in recent years."

The proposal is one of 10 which the government will make at the G20 summit of industrialised and emerging economies on 2 April called by London to come up with a coordinated response to the worst global slump in decades.

Another proposal is for multilateral institutions such as the European Bank for Reconstruction and Development and the World Bank to distribute more money during times of economic crisis.

Spain also wants private banks to be required to put away more funds during good economic times so that they can be used during recessions.

The document, obtained by AFP, also tackles the issue of moral hazard, where as in the current crisis, fearful governments have spent trillions to shore up ailing banks whose failure could undermine whole economies.

"This movement towards the socialisation of the risks of the financial industry creates a moral risk for the future because institutions could be led to believe that if they are sufficiently big or have a systemic importance, public money will always rescue them," the document said.

Created in 1999, the G20 countries account for 85 percent of the world economy and about two-thirds of the world's population.

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

AFP / Expatica

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