The International Monetary Fund (IMF) is looking to boost its lending power by $600 billion as it continues to help countries that are still struggling from the European debt crisis. Other nations believe that Europe must do more to support its ailing members instead of the IMF stepping in all the time. The Group of 20 officials will meet in Mexico City tomorrow and Friday.
“Many countries want the Europeans to move ahead with tougher and clearer measures, which at this moment translates to more resources to its stability fund,” said a senior Brazilian government source attending the meeting.
In a statement, the IMF said it will need $500 billion to lend to member countries that need it. IMF sources told Reuters on Tuesday, the other $100 million is need as a “protection buffer.”
These same sources added the IMF estimates a $1 trillion global financing gap over the next two years if economic conditions worsen around the world. The Euro reacted positively to the news with the EUR/USD pair up 1.5% at 1.2853.
The IMF has already received a promise from euro zone nations for $200 billion, but G20 officials in Mexico have said there is some resistance to this.
The U.S. with support from Canada, Japan and Korea have been pressuring European countries to do more when it comes to additional measures, a source told Reuters. European countries on the other hand believe they have done more than enough and want more IMF resources now
“If, with the parallel discussion, we can achieve extra measures from the Europeans and afterwards agree on promises of additional resources for the IMF from non-European countries in the G20, I think it would be a good result,” the source said.
Hopefully, both sides can reach some kind of consensus to keep the situation under control. With the recent slew of credit downgrades, global markets will most likely react strongly to any news coming out of Europe.