WASHINGTON – Finance Minister Jim Flaherty had some tough talk on Thursday for the 17 euro zone countries, saying Canada and other non-euro nations shouldn’t be expected to commit any more bailout funds to the region and even publicly challenging a top European Central Bank official.
The euro zone’s bailout lending capacity is still too small and euro zone countries haven’t done enough to bolster it on their own, Flaherty told a session sponsored by the Bertelsmann Foundation in the U.S. capital.
“The firewall that is being constructed so far is not adequately funded in our view by the euro-zone countries,” he said. “They should seek to overwhelm the problem …. They have the resources to do it.”
Joerg Asumussen, a member of the European Central Bank Executive Board, countered: “With all friendship, I would say the Europeans have done their work on the firewall.” He noted that the bailout lending fund is now at $1 trillion.
“Now it’s up to our global partners,” added the former deputy finance minister of Germany. “This is in the interest of all of us.”
Earlier Thursday, Christine Lagarde, head of the International Monetary Fund, warned that the European debt crisis poses a grave threat to poorer countries that are dependent on trade and global credit markets.
She wants to see another US$400 billion added to the IMF’s euro-zone emergency fund with the help of Canada, the U.S. and other nations. But she’s been struggling to convince Canada, among other countries, to pony up.
Asmussen, too, called on Canada and other nations to commit more money to the IMF. The euro-zone countries have already promised another US$200 billion to the IMF, he pointed out.
Not for the first time, Flaherty rejected those calls in an increasingly tense showdown certain to dominate meetings on Friday with the finance ministers of the world’s richest and most influential nations.
“Canada has always supported the IMF,” he said at a news conference following the session. “Our view is that the IMF has adequate resources now to deal with any imminent situation in Europe.”
He added he had concerns with how the IMF is governed, making repeated reference to the “troika” system that has the IMF working alongside the European Commission and the European Central Bank.
“That’s not the traditional way the IMF operates and I’ve raised this with (Lagarde). Traditionally, the IMF would direct what needed to be done and sit on opposite sides of the table,” he said.
“Because of the large number of European seats on the board of the IMF, some of us, and Canada certainly, is of the view that we ought to have two keys, in effect. We would have one vote by the euro-zone countries and another vote for approval by the non-euro zone countries.”
He added he and Lagarde have an “excellent” relationship despite whispers of tension between the pair.