Business, Finance & Economics

Europe debt crisis: IMF to the rescue?


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Chantal Abergel

Can the International Monetary Fund "break the chain of contagion?"

That's the goal, anyway, as the IMF today announced a new plan to help countries cope with rising debt problems in Europe and elsewhere.

Here's what IMF Managing Director Christine Lagarde said in a statement:

“The Fund has been asked to enhance its lending toolkit to help the membership cope with crises. We have acted quickly, and the new tools will enable us to respond more rapidly and effectively for the benefit of the whole membership. The reform enhances the Fund’s ability to provide financing for crisis prevention and resolution. This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness,” Lagarde said.

So what does this mean?

The IMF has more power to help "crisis-bystanders," or at least those with "sound policies and fundamentals," it said in a press release announcing the changes

In other words, the IMF would be able to provide assistance to countries "in a broader range of circumstances."

But as Business Insider points out, there are some problems with the plan.

First, it's not clear that the IMF would have enough money on hand to bail out a giant economy like, for example, Italy's. 

Second, the US — the world's biggest contributor to the IMF — would have to approve the new measures, a tricky proposition in Washington D.C.'s current climate of austerity.

Stay tuned. 

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