Last Updated: Fri Oct 14, 2011 16:27 pm (KSA) 13:27 pm (GMT)

Emerging economies may need to intervene on EU debt: South Africa

South African finance minister Pravin Gordhan believes “Europe is at the epicenter of the current crisis.”  (Photo by Reuters)
South African finance minister Pravin Gordhan believes “Europe is at the epicenter of the current crisis.” (Photo by Reuters)

South Africa’s finance minister warned Friday that the resources of the IMF and European rescue fund may be “inadequate” if debt contagion spreads further but that emerging economies could help.

“The resources that are available in the EFSF (European Financial Stability Facility) and IMF (International Monetary Fund) are inadequate if the contagion continues to spread any further,” Finance Minister Pravin Gordhan said on the sidelines of an OECD conference in Paris.

Speaking in Paris at the organization of developed nations ahead of a meeting of G20 finances ministers this weekend, Gordhan said the so-called BRICS nations -- Brazil, Russia, China, India and South Africa -- could be called in to assist struggling European economies.

“The bigger of the BRICS countries have said that they would be in a position to help international institutions if they are requested to,” he said.

“It all depends on how the EFSF is leveraged by the Europeans themselves,” he said.

The minister said that ahead of a G20 summit in France on November 3-4, non-European G20 nations would be looking for assurances that Europe is coming to grips with its financial troubles.

“Europe is at the epicenter of the current crisis,” he said, adding that "Europe has been behind the curve for the last year or so."

“We are looking for assurances from our European colleagues that by the time the summit of the G20 takes place, we will have a clear message that will create confidence that Europeans are dealing with these issues and that the world can begin to stabilize itself,” he said.

The euro zone debt crisis will dominate a summit of G20 finance chiefs and central bank heads in Paris, with a downgrade of Spain’s credit rating highlighting the risk of a much larger economy than Greece coming under threat.

French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for a European Union summit on October 23 and parallel discussions are taking place on the need to give the International Monetary Fund more firepower.

Fears about the damage a default by Greece -- and possibly others -- could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17 percent from their 2011 high in May.

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