IMF sees 'dark clouds' over the recovery

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IMF sees 'dark clouds' over the recovery

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The International Monetary Fund’s Christine Lagarde has again delivered a mixed message about the global economic recovery and warned “the eurozone is the epicentre of potential risk”.

Speaking ahead of the IMF’s annual meeting attended by the world’s leading finance ministers and central bankers in Washington, Lagarde said: “We are seeing a light recovery, blowing in a spring wind, but we are also seeing some very dark clouds on the horizon – which is another way of saying there is a bit of recovery, timid and a fragile situation with still high risks.”

Lagarde said she expects further big contributions to boost the IMF’s fund to help safeguard countries from the eurozone debt crisis now that Europe had taken significant steps on its own.

She said the IMF has so far raised $320 billion of its $400 billion target as it moves to increase its firepower to deal with the eurozone debt crisis.

It has all come from Europeans and Japan. The IMF wants additional contributions from the leading emerging economies, which are resisting until they get some further assurance they will get a larger say in running the international lender.

China, Brazil and Russia have said they are willing to contribute but they want to get more voting power at the IMF in return.

A larger IMF war chest to safeguard countries outside of Europe that might run into trouble if the euro zone’s troubles widened could help ease concerns in financial markets over the risk of global contagion.

Investors are worried the crisis could hit Italy and Spain, forcing them to join Greece, Ireland and Portugal as bailout recipients.