Swiss grant extra funds and hold on to IMF seat

Widmer-Schlumpf urged the consolidation of government finances Keystone

The Swiss government has pledged an extra $10 billion (SFr9.1 billion) to the International Monetary Fund (IMF) to tackle Europe’s debt crisis and stabilise the global economy.

Facing pressure by governance reform plans, Switzerland agreed to share its seat on the IMF executive board with Poland, one of eight members of a mixed voting group made up of countries from eastern Europe and central Asia.

Finance Minister Eveline Widmer-Schlumpf told the IMF meeting that Switzerland was willing to contribute to efforts to bolster the international financial system.

“Within the scope of a concerted action, Switzerland has promised to make a contribution of $10 billion which is subject to approval by parliament,” a finance ministry statement said.

She urged consolidation of government finances and appropriate burden sharing among creditor states for additional funds strictly on a temporary basis.

Widmer-Schlumpf, who holds the rotating Swiss presidency this year, also called for more efficiency of the IMF implementing “with the utmost consistency the necessary measures regarding budgetary, monetary, financial centre and structural policy”.

Reforms

The IMF on Saturday announced it received a total of $430 billion in pledges from  individual states, nearly doubling the lending agency’s reserves available for loans to cash-strapped countries.

IMF director Christine Lagarde said the funds should help assure financial markets troubled by prospects that Spain could be next to ask for emergency loans to escape bankruptcy.

The IMF has already provided rescue programmes for Greece, Portugal and Ireland.

The spring meeting of the so-called Bretton Woods institutions, including the IMF and the World Bank, ended with calls on eurozone countries to press ahead with reforms.

“In the euro area continued progress on ensuring debt sustainability, securing financial stability and undertaking bold structural reforms will be crucial to boosting confidence and productivity,” an IMF statement said.

Cooperation with Poland

Widmer-Schlumpf signed a memorandum of understanding with Poland on Saturday confirming Switzerland’s seat on the IMF executive board, but sharing it with the eastern European country.

The agreement foresees that both countries will in the future nominate the executive director for a two-year period on a rotating basis.

Switzerland will maintain the lead in its group.

The agreement is conditional of the implementation of governance reforms within the IMF, expected in 2014, according to the finance ministry.

Two years ago, the IMF approved a proposal to review the 24-strong executive board to give emerging economies a greater say at the expense of industrialised European countries.

Switzerland, which joined the IMF in 1992 has been leading a group of eight countries – Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan as well as Poland and Serbia – with an overall voting share of 2.77 per cent within the IMF.

As part of the governance reforms several western European states, including Austria and the Benelux countries, have come under pressure.

Switzerland and Bretton Woods

Switzerland joined the IMF and the World Bank, also known as Bretton Woods institutions, following approval in a nationwide vote in 1992.

It has been represented on the agency’s executive body, leading a group of currently eight nations from central Asia and eastern Europe.

The Swiss group has a total voting share of 2.77%, while Switzerland accounts for 1.4%.

Supplied by the National Bank, Switzerland grants credits worth SFr4.8 billion on a regular basis to the IMF to support measures for member countries.

In exceptional cases the IMF can raise extra funds from member states.

As part of IMF efforts to stock up a special fund, the Swiss government pledged an additional $10 billion loan.