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Euro nations urged to strengthen economies

By Don Lee, Tribune Washington Bureau –

WASHINGTON — The world’s top finance officials pressed Europe to do more to address debt problems, saying the global recovery remains fragile and that the Eurozone shouldn’t relax now that it secured more resources to fight the crisis.

Finance ministers meeting in Washington this weekend called on euro-area policymakers to strengthen their banks and continue to make reforms that would lead to stronger and more balanced growth. They pledged to boost the International Monetary Fund’s emergency lending capacity by $430 billion.

U.S. Treasury Secretary Timothy F. Geithner, while welcoming the new commitments to bolster the IMF’s firepower, said, “The success of the next phase of the crisis response will hinge on Europe’s willingness and ability, together with the European Central Bank, to apply its tools … flexibly and aggressively to support countries as they implement reforms.”

Jun Azumi, Japan’s finance minister, said policymakers “should avoid slipping into complacency and exploit the temporary breathing space (to build) … resilient economic, fiscal and financial systems that are needed to forestall future crises.”

Earlier in the week, Japan pledged $60 billion to expand the IMF so-called firewall to contain the Eurozone’s long-running crisis. That was followed by smaller commitments and conditional pledges from other countries. China, Russia, Brazil and India also were expected to contribute.

The new commitments, although less than the $500 billion sought, was still the second-largest in IMF history, experts said. They said it is likely to give investors greater confidence that the problems can be contained.

The IMF’s governing panel said nearly as much Saturday in urging the Eurozone to undertake “bold structural reforms” that would be “crucial to boosting confidence and productivity, facilitating rebalancing within the monetary union, and promoting strong and balanced growth.”

Brazil Finance Minister Guido Mantega, went further, criticizing some nations for cutting spending when, he said, they should be doing the opposite to spur growth.

“Germany and other Northern European countries may be able to adopt more flexible fiscal policies,” he said. “This would not only help global demand but also facilitate the rebalancing within the euro area.”

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