Briefing Paper

Stephen Pickford
  • As problems in the eurozone threaten to spread more widely through the global economy, in the run-up to the Cannes G20 Summit international policy-makers are actively considering strengthening support measures for countries affected.
  • Beyond the EU Heads of State agreements of 27 October 2011, both the International Monetary Fund and regional financing arrangements (especially in Europe and Asia) have a big role to play in avoiding fears that existing mechanisms are inadequately resourced and too inflexible to deal with another systemic crisis. 
  • Consideration needs to be given to substantially augmenting the IMF's fire-power (including allowing it to borrow from the markets), improving cooperation between the IMF and regional arrangements, and setting up a multilateral system of central bank swap arrangements.
  • More flexible ways for countries to access the IMF's new borrowing facilities could be achieved through automatic pre-qualification processes, and making clear the scale of resources available.
  • It will not be easy to get agreement to these reforms, but the cost of not having effective mechanisms in place to deal with systemic crises in future would be enormous.