HONG KONG — The International Monetary Fund said Monday that it aims to expand lending capacity to counter the impact of Europe’s escalating sovereign-debt crisis, which has caused the global economic outlook to deteriorate “noticeably.”
“In the coming weeks, we will be making the case for a step up in the fund’s lending capacity,” said David Lipton, IMF’s first deputy managing director, at a forum in Hong Kong. “The goal is to be able to augment the resources Europe will be putting into tackling its problems, but also to be able to meet the needs of innocent bystanders around the world.”
The Washington-based fund will cut its global growth estimate for 2012 next week, with Europe’s crisis threatening to further hurt world economic expansion, Lipton said. European leaders are trying to rescue efforts to deliver new fiscal rules and cut Greece’s debt burden as they seek to reassure investors after Standard & Poor’s decision to cut the ratings of nine euro-region nations, including France, on Friday.
“The European outlook is grim, and the risks for Europe and the world are high,” Lipton said. “Concerns about fiscal sustainability and banking-sector losses have widened sovereign spreads to unprecedented levels for many euro area countries. Bank funding has all but dried up in the euro area, leading banks to sell assets and restrict lending. Now deleveraging threatens to push growth below even the reduced forecast we will publish next week.”
The IMF is scheduled to release revised global projections Jan. 24. Olivier Blanchard, the Washington-based fund’s chief economist, said in a Bloomberg Television interview this month that with European growth “very close to zero at this point,” there would be a “substantial” cut to the most recent 2012 global expansion estimate of 4 percent.
