Eurozone optimism as IMF members boost global firewall

The eurozone has been given a boost by the expansion of a global crisis fund, with China and Russia ready to stump up more money. The euro rallied on the news, with signs of increased business optimism.

There was fresh optimism for the eurozone late on Friday after an announcement that the debt-crisis resources of the International Monetary Fund (IMF) would receive a boost of more than $430 billion (325 billion euros).

"We have commitments that are north of $430 billion," IMF managing director Christine Lagarde told journalists at a news conference in Washington. "That almost doubles the lending capacity of the fund."

The news on Friday evening followed meetings of the IMF and the finance chiefs of the Group of 20 economic powers. Lagarde said it signaled the "strong resolve of the international community to secure global financial stability and put the world economic recovery on a sounder footing."

With Spain and Italy's economies in a precarious position at present, the new funding was seen as particularly good for the eurozone. Theoretically, however, the new global firewall is available to any country that is a member of the IMF. 

Dark clouds still loom

Earlier, former French finance minister Lagarde had warned that the world economy still faced testing times.

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"We are seeing light recovery blowing in the spring wind, but we are also seeing very dark clouds on the horizon," she said.

Some $72 billion in pledges by emerging giants China and Russia, along with other countries that were not named, put the IMF over its $400 billion target.

"These resources will be available for the whole membership of the IMF, and not earmarked for any particular region," the IMF said in a statement, reflecting members' concerns that money would only be available to members of the eurozone.

There was a boost for the euro on international markets, thanks in part to the news, late on Friday. The currency was trading at $1.322, up from $1.313 the previous day, with a business confidence report from Germany also providing a boost.

The Munich-based Ifo, or Institute for Economic Research, said its closely watched business climate index had nudged up to 109.9 points in April from 109.8 points in March, despite analysts' expectations there would be a decline.

rc/nrt  (AFP, dpa)

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