Bundesbank warns against more powerful IMF
Reuters - 06/09/2011 20:00:00
By Marc Jones
FRANKFURT, Sept 6 (Reuters) - Germany's Bundesbank criticised proposals to beef up the power and financial resources of the International Monetary Fund on Tuesday, warning it would erode the autonomy of the world's central banks and make many liable to pay for the fund's actions.
Andreas Dombret, one of the German central bank's board members, warned that financial turmoil was far from over, but urged authorities not to attempt to turn the IMF into a crisis-fighting superpower.
"Like many other IMF members, the Bundesbank is critical of these endeavours," Dombret said in a speech at an annual meeting of a social policy association, referring to plans to give the IMF considerably more funds and set up global financial safety nets under its direction.
"Central banks' monetary policy autonomy would be substantially restricted if the IMF were to become a 'world central bank' or the global lender of last resort - which is what almost unlimited liquidity provision would in fact mean."
He added it would mean the central banks whose countries underwrite the IMF's quasi-currency, the Special Drawing Right, would be left on the hook for the fund's actions as the IMF itself cannot print money.
The euro zone has already clashed heavily with the IMF, now headed by former French Finance Minister Christine Lagarde.
It has taken umbrage at the fund's assessment that European banks may need as much as 200 billion euros ($287 billion) to repair their battered balance sheets, a figure far higher than the 2.5 billion European bank stress tests came up with in July. (news)
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