With calls for prompt action by the European Union coming from all sides -- including China, the United States, Brazil, and a host of fragile poorer countries -- the IMF said that Europe's leaders would take whatever action is needed to prevent the current debt crisis from escalating.
But worries remained that the ways the advanced economies were addressing their problems were already hurting the rest of the world, with surplus liquidity fuelling food and oil price increases and market volatility, and spending cuts choking off growth, investment and trade.
Acknowledging that the 27-nation European Union -- the Fund's largest shareholder -- is at the centre of the crisis, the IMF's policy board said it had agreed to act decisively and collectively "to restore confidence and financial stability, and rekindle global growth."
"Euro-area countries will do whatever is necessary to resolve the euro-area sovereign debt crisis and ensure the financial stability of the euro-area as a whole and its member states," the board said.
IMF chief Christine Lagarde, on the firing line two months after being unexpectedly drafted from her job as French finance minister to lead the global emergency lender, insisted that the world's top financial officials were serious about facing the crisis.
"There was no denial, no finger-pointing," she said of Saturday's meeting of the IMF's powerful International Monetary and Finance Committee.
Tharman Shanmugaratnam, the IMFC chairman, added the members clearly recognised "we are in a precarious situation."
"There was not just individual resolve, but a collective resolve that we will do what it takes to prevent an escalation of the crisis," he said.
"And that we will also do what it takes to avoid the prospect of a prolonged period of stagnation in the advanced economies, and therefore, a prolonged period of weakness in the global economy."
The promises came after a wave of calls for European leaders to take action.
Chinese central bank governor Zhou Xiaochuan told the IMFC Saturday that "the sovereign debt crisis in the euro area needs to be resolved promptly to stabilise market confidence."
US Treasury Secretary Timothy Geithner called the sovereign debt pressures and banking strains in Europe "the most serious risk now confronting the world economy.
"Further action to expand the effective capacity of these commitments is still necessary to create a firewall against further contagion," he told the committee.
Brazil's finance minister Guido Mantega added that European policymakers were responsible "to ensure that their actions stop contagion beyond the euro periphery," referring to Greece, Ireland and Portugal, all under IMF-EU joint rescues.
Mantega though also assailed the "persistently loose monetary policies" in the United States, Europe and Japan as having caused "considerable headaches for emerging-market countries," he said.
Lagarde meanwhile said that the IMF, after massive rescue loans to Greece, Ireland and Portugal, likely needed more funding if the European crisis deepens.
"The Fund's credibility, and hence effectiveness, rests on its perceived capacity to cope with worst-case scenarios," she said.
"Our lending capacity of almost $400 billion looks comfortable today but pales in comparison with the potential financing needs of vulnerable countries and crisis bystanders."
She called on member countries to quickly endorse a 2010 mandate to double IMF member quotas.
-AFP/wk
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