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Developing Countries to the Rescue of the Eurozone

in International Business

Developing Countries to the Rescue of the Eurozone

Brazillian Finance Minister Guido Mantega said that developing nation would be willing to provide more money to ease the eurozone’s debt crisis, in return for more power within the International Monetary Fund. Minister Guido Mantega made this statement at a G20 meeting in Mexico.

He also called on eurozone countries to contribute more of their own funds. UK Chancellor George Osborne echoed his statement.

Mr Mantega said: “Emerging countries will only help under two conditions; first that they strengthen their firewall and second for the IMF [voting rights] reform be implemented.”

Mr. Mantega and other G20 finance ministers want eurozone nations to put more funds into the European Stability Mechanism (ESM), the fund used to bail out nations struggling with their sovereign debt.

Countries including the United States, Canada and Japan increased pressure on the eurozone to boost its firewall to avoid contagion.

They suggest the 17-nation bloc combine its temporary European Financial Stability Facility with the permanent European Stability Mechanism, to come into force in July, to provide a war chest of around 750 billion euros ($1 trillion).

The powerhouse of the European Union said such proposals made “no economic sense”.

“Let me be clear: it doesn’t make any economic sense to follow the calls… for endlessly pumping money into the rescue funds nor setting up the ECB printing press,” German Finance Minister Wolfgang Schaeuble told a business reception.

“This would create disincentives for countries to carry on consolidating and reform and would not improve the eurozone’s economic outlook,” he added.

Germany and other EU nations are piling heat on non-European members, China, Japan and the US, to gain support for an additional USD 500 billion of resources for the IMF. Eurozone countries have already committed an additional 150 billion euros in bilateral loans but the United States has repeatedly refused to put in more money.

The spat over eurozone firewall overshadowed G20 meeting.

Mexico hopes to focus its presidency of the G20 on creating a stronger financial system for the future with structural reforms, better checks on banks and promoting the green economy.

Tags assigned to this article:
EU crisisEU firewallG20 meeting MexicoGermanym

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