BRICS Comes to Aid the Eurozone, Pledges $75 billion to IMF
The continuing crisis in the Eurozone is causing growing concerns over the whole world. It’s undeniable that the crash of Europe’s economy isn’t just a problem of the Eurozone, but a global problem with many developing economies reliant on healthy trading accounts with the bloc. Yesterday’s pledge from BRICS leaders is another acknowledgement of that fact.
An informal meeting of the five-nation bloc known as BRICS (Brazil, Russia, India, China and South Africa) was held in Los Cabos on 20 June ahead of the opening of the seventh G20 Summit in the Mexican resort town.
Recognizing the importance of finding a cooperative solution to the Eurozone crisis before it does greater damage to the global economy, BRICS leaders agreed upon the terms of making a $75 billion contribution to the IMF’s $430 billion rescue fund. The biggest contribution will come from China, which has agreed to contribute $43 billion. Contributions from Russia, Brazil and India will be $10 billion each, while South Africa will add another $2 billion.
!m(/uploads/story/131/thumbs/pic1_inline.png)The pledges were made after the leaders of BRICS agreed to increase the funds available to the IMF, by enhancing their own contributions to the Monetary Fund.
However, it became clear from the official statement that the fresh funds will be used only after the existing resources, including the New Arrangements to Borrow, are substantially utilized.
“This would promote adequate burden sharing among IMF creditors,” the statement said and further clarified that the new contributions were made on the assumption that the reforms agreed upon in 2010 will be implemented fully and on time.
The leaders swap arrangements among national currencies and also pool reserving. The finance ministers and the national banks of the five nations will have to find a way in which to enable this complex syttem to fit within the internal legal frameworks. The results of their endeavours in on this question are to be reported to the leaders at the 2013 BRICS summit.
BRICS’ contribution comes at an opportune moment. Greece is on the ropes, Spain is struggling and Italy is expected to follow. The three countries have to deal with massive debts and collapsing bank systems, which threatens the future of the whole Eurozone. But the aid from the newly emerged economic powers of the BRICS bloc can help to restore faith in the 17 nations sharing common currency. Especially with the outcome of the latest Greek elections on Sunday that could have struck a damaging blow to the Eurozone. But with New Democracy winning the election and, most importantly, with the successful formation of a pro Euro zone government, Europe (and the whole world) can feel some relief and focus on taking decisive measures to prevent further domino fall. It will be long and hard way up out of the current mess, but the fact that countries outside the Eurozone and EU are willing to participate in finding a solution should make it an easier climb.
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