IMF warns about funding capacity for future bailouts

THE INTERNATIONAL Monetary Fund has warned there may not be enough funding available to support the crash of a large Eurozone country’s economy.

IMF chief Christine Lagarde told the media today that the fund’s credibility and effectiveness rely on “its perceived capacity to cope with worst-case scenarios”. However, its lending capacity could come under serious pressure if the global economy worsens.

The organisation had said earlier this weekend that the world economy has entered a dangerous new phase.

It said it is monitoring the situation closely and is encouraged by the willingness of the Eurozone members to take action to resolve the ongoing debt crisis.

Lagarde warned that world leaders need to act urgently and in cooperation to prevent the global economy from slipping back into recession.

Alongside the EU and ECB, the IMF is already involved in the multi-billion bailouts of Ireland, Greece and Portugal. Concern is growing that Greece is on the cusp of defaulting on its debt and there are reports that some Eurozone states are pushing for an ‘orderly default’ by Greece.

Meanwhile, France has reportedly sought funding from the European Financial Stability Fund for its under-pressure banks.

- Additional reporting by the AP