The Yomiuri Shimbun (Apr. 23, 2012)
Boost of IMF's lending power significant, but stay vigilant
G20共同声明 IMF増強は前進だが課題も(4月22日付・読売社説)

The world has moved a step closer to containing the European debt crisis, as the Group of 20 major economic powers worked harmoniously to reinforce the financial foundations of the International Monetary Fund.

The G-20 meeting of finance ministers and central bank governors has concluded in Washington after adopting a joint statement. Traditional economic powers such as Japan, the United States and Germany participated in the meeting along with China and other emerging countries.

The statement referred to global commitments to increase the IMF's lending resources--the meeting's focus of discussion--by over 430 billion dollars (about 35 trillion yen), achieved through international cooperation including efforts by Japan.

The increase will double the amount the IMF can loan to countries in financial crisis. The
G-20 economic powers have finally succeeded in forming a united front against the eurozone debt crisis after being urged by markets to do so for a long time.

Apart from the IMF, Europe also has prepared its own funds to provide loans to such countries. Altogether, the safety net to prevent the debt crisis from spreading will top 110 trillion yen. We hope the reinforcement of the safety net will help stabilize markets.


Japan took lead role

It is worthy to note that Japan led discussions at the G-20 meeting. At the beginning of this year, Europe announced it would provide 200 billion dollars to the IMF, but other nations had been reluctant to follow suit. However, just days ahead of the G-20 meeting, Japan announced it would provide 60 billion dollars to the IMF, ahead of other nations.

The announcement primed the pump and a number of nations, including Nordic countries and Britain, promised to provide money to the IMF. In the end, Brazil, China, India and Russia--nations that had taken a cautious stance--promised to cooperate, without disclosing the amounts they would provide.

It is regrettable that the United States, the IMF's largest contributor, declined to provide money to the institution, noting an increase in its budget deficit. However, it was significant for the IMF to increase its lending resources to 430 billion dollars, almost accomplishing the goal it set in January of securing 500 billion dollars.

However, the European debt crisis has yet to be resolved and is still a threat to the global economy.

The IMF statement said the possibility of the world economy plunging into a severe crisis has begun to recede after peaking a few months ago, but warned that "downside risks still persist." We share this concern.


Worries on Spain

Credit uncertainty is still smoldering in Spain, raising the nation's bond yields. If Spain's financial crisis worsens, it may reignite crises in Italy and Greece, and the whole region could flare up once again.

The French presidential election and Greek general election will soon take place. The results may endanger the framework of measures established to combat the region's debt crisis.

The European economy is expected to contract this year. If eurozone nations become keen to implement austerity measures, this could further slow down the economy. The economic slowdown would curb tax revenues, resulting in deterioration of fiscal conditions. Such a vicious cycle has become a real possibility.

The G-20 economies should warn eurozone economies not to lower their guard, and demand they steadily implement fiscal reforms and revive their economies.

In addition to the European debt crisis, the world economy also faces the difficult problem of surging oil prices. The G-20 economies should not forget they are being tested on whether they can unite further to contain the crisis.

(From The Yomiuri Shimbun, April 22, 2012)
(2012年4月22日01時50分  読売新聞)