G20 Finance Ministers and Central Bank Governors meet in Mexico City
At their meeting in Mexico City on February 25-26, the G20 Finance Ministers and Central Bank Governors prioritized the need to strengthen the International Monetary Fund (IMF) and European financial support facilities.
As Mexican President Felipe Calderón reported earlier, Mexico's priorities as the chair of the G20 in 2012 are to ensure global economic stability, strengthen financial institutions, reduce food price volatility and promote the concept of "green growth."
Calderon said Mexico considers it important to adopt an effective strategy of curbing expenditure to prevent the temporary liquidity problem from causing large countries like Italy and Spain to default. He added that Mexico supports strengthening of the global financial system to promote inclusive economic growth and confidence in international financial institutions, primarily the IMF, and announced Mexico's willingness to increase its contribution to the fund.
Russian Finance Minister Anton Siluanov voiced Russia's stance on this issue. He said Russia is ready to commit $10 billion to the IMF. This sum will be allocated by its Central Bank. "These funds will come from the Bank of Russia rather than the budget. The Bank of Russia will use its international reserves for this purpose," Siluanov emphasized.
"We will consult with our colleagues and discuss their positions. This is a question of allocating $600 billion and, if necessary, we will adjust our stance based on the positions of other countries," Siluanov said, adding that everything will depend on the formation of a consolidated opinion on replenishing the IMF resources.
In total, the IMF resources are supposed to be brought to one trillion dollars. Siluanov said that the European countries, as alongside with China and Japan, are ready to make the biggest contributions.
The communique of the meeting states that Europe must take additional anti-crisis measures to prevent its debt problems deepening. Once this is done, a decision will be made on making additional contributions to the IMF.
The document specified that the work on assessing the sums required for the IMF should be completed in March 2012. Head of Mexico's Central Bank Agustin Carstens said much the same thing.
"It is important for the European countries to hold detailed talks on anti-crisis measures in the coming weeks in March," Carstens said at a news conference. He added that the results of these talks will determine the decision on increasing the IMF funds at the next meeting of G20 finance ministers in April 2012.
"Today we did not discuss the total amount. This work will be continued in Europe and will produce results in March. We will adopt a common position on the basis of these results," Carstens stressed.
Managing Director of the IMF Christine Lagarde told journalists that the global economy is still not out of the danger zone although its relative stability has already been ensured. "We are witnessing a certain stabilization but hidden risks remain and the global economy is not yet out of the danger zone," she said, adding that the main risks lie in the current situation in the financial system, the high levels of public and private debt, and soaring oil prices.
Following the meeting Siluanov reported that Russia had invited those G20 countries with huge national debts to take additional measures to lower the debt burden during the implementation of structural reforms, primarily, by monitoring the reduction of the national debt.
"These countries should plan how they will lower their debts, over what time period, what structural measures they should take to this end and what deficits they will have in the near future," he said.
Siluanov explained that the proposal entails extending the G20 Framework for Strong, Sustainable and Balanced Growth with regard to mutual assessment of the reasons and consequences of the emergence of major imbalances in the global economic system. This will allow the G20 to reassure financial players and investors that national debts are being kept under control.
"I have the impression that many of my colleagues think the same way," Siluanov said. He recalled that the issue of high national debt remains an urgent one despite the positive measures being taken by the European Union regarding Greece and the actions of the European Central Bank to promote liquidity.
"Many think it is too early for the Eurozone countries to start patting themselves on the back, because the main reason for risk expectations is still there - the high level of their national debt," Siluanov observed, adding that this debt currently amounts to about 90% of GDP on average, although for many countries the figure is over 100%.
"This problem will not be resolved overnight. It will probably take many years, even a decade, to reduce the national debt," he emphasized.