International Monetary Fund

WASHINGTON — The managing director of the International Monetary Fund said Tuesday that the global recovery is growing stronger but remains very fragile. She urged the international community to give her organization “more firepower” to help keep tottering economies from going under.

“We certainly need more resources,” Christine Lagarde told the annual meeting of The Associated Press, without specifying how much more was needed. Lagarde said the IMF would address that question at its spring meeting in two weeks.

The IMF currently has about $400 billion in resources that it can use to provide loans to countries in trouble. Lagarde has talked about expanding those resources to close to $1 trillion.

Lagarde said the global economy is making some advances in digging itself out of the worst downturn in decades, but the recovery remains particularly frail in Europe. She suggested cutting government spending too quickly in developed countries like the United States and larger European nations could make things worse, not better.

Policymakers on both sides of the Atlantic need “breathing space to finish the job,” she said. Lagarde also said that Europe’s faltering would quickly spread, and the U.S. recovery, slowly gaining strength, “might well be in jeopardy.”
“America has a large stake” in how Europe and the rest of the world fares,” Lagarde said.

The IMF official said it is important to continue and expand emergency programs among the 17 countries that use the euro to help heavily indebted countries there.

“We should not delude ourselves into a false sense of security,” she said. “The recovery is still very fragile. The financial system in Europe is still under heavy strain. Debt is still too high, public and private. Stubbornly high unemployment is straining the seams of society. ... Rising oil prices are clearly another cloud on the horizon.”

Lagarde’s remarks came after the Eurozone countries on Friday boosted their emergency bailout funds for heavily indebted countries by $1.1 trillion (800 billion euros). That was short of the $1.3 trillion (1 trillion euros) that Lagarde and other international leaders have said is needed to calm financial markets.

On Tuesday, she said, since the Europeans have moved first to raise their firewall, “the time has come to increase our firepower.” While short of what the IMF had hoped for, it was a good first step — and something she said the IMF could work with.

During a brief question-and-answer period, Lagarde was asked whether some of the more debt-burdened countries would be better off leaving the group.

“As to the size of the eurozone and whether Greece, Portugal and whoever else should or should not be in, you know, it’s a very deeply rooted sentiment that the Europeans, particularly from that area, have, that what they have built over the last 50 years or so, right after the second World War, is something that they are very, very attached to.

“And from discussions I’ve had with many leaders, including from the lead countries in the Eurozone, I don’t think that there is any political intention, disclosed or hidden, to actually break up that zone,” she said.

Lagarde also suggested that bold steps are needed such as those taken by the U.S. Federal Reserve and the European Central Bank to help “keep growth strong and steady.”

And she said that most countries are running deficits that are too high and “need to bring down debt over time.” And while “some countries under pressure have no choice but to cut deficits today...a global undifferentiated rush to austerity will prove self-defeating. Countries like the United States with low costs of borrowing should not move too quickly.”

Those remarks thrust her into the U.S. presidential debate, where Republicans are united in demanding deep cuts in federal spending, while President Barack Obama — who also addressed the meeting — and congressional Democrats are calling for more job-creating spending, along with raising taxes on the wealthy to help trim budget deficits now exceeding $1 trillion a year.

Lagarde noted that more than 200 million people globally, including nearly 13 million in the U.S., are without work, declaring that “jobs must be a priority.”

BUDAPEST, Hungary — Hungarian President Pal Schmitt resigned Monday because of a plagiarism scandal regarding a doctoral dissertation he had written 20 years ago on the Olympics.

Schmitt, who was elected to his largely ceremonial office in 2010 for a five-year term, told Parliament he was stepping down because the controversy over his dissertation was dividing Hungary.

“When my personal issue divides my beloved nation instead of uniting it, I feel it to be my personal duty to finish my service and resign,” Schmitt said, drawing applause and cheers from opposition lawmakers. “I ask God’s blessing for Hungary and for your work.”

Schmitt, 69, then quickly left the chamber accompanied by Prime Minister Viktor Orban as lawmakers from the governing parties — Orban’s Fidesz and the Christian Democrats — gave him a standing ovation.

Parliament later voted 338-5, with six abstentions, to accept Schmitt’s resignation.

Last week, Schmitt’s 1992 doctorate from Semmelweis University was revoked after a university committee found that most of his thesis about the modern Olympic Games had been copied from two other authors.

The International Olympic Committee said Monday it would review the case and decide whether any action is needed against Schmitt, who has been an IOC member since 1983. Schmitt, who won gold medals at the 1968 and 1972 Olympics for fencing, could face IOC sanctions for tarnishing the Olympic movement.

Hungary’s governing coalition said it would hold talks with the three other parliamentary parties to find a successor. Speaker Laszlo Kover will replace Schmitt until a new president is elected by lawmakers in the next 30 days.

Schmitt’s resignation — a day after he told state radio he would not step down — comes at a turbulent time in Hungarian politics. Orban, who had made his name by protesting Hungary’s communist dictatorship, is now being criticized for pushing the Eastern European nation toward centralized rule.

The European Union, which Hungary joined in 2004, has launched legal proceedings against Hungary because it believes that Orban’s coalition, which has an unassailable two-thirds majority in Parliament, is compromising democratic principles such as the independence of the central bank and judiciary with new laws.

The conservative government has also changed the country’s media law, a move widely criticized for boosting political control over the press.

Late in 2011, Hungary surprisingly asked the EU and the International Monetary Fund for financial assistance as its currency fell to all-time lows against the euro. However, official talks with the lenders have yet to start, partially because legal changes demanded by the EU and the IMF have yet to be seen.

The laws challenged by the EU, including a few that were partially struck down by Hungary’s own Constitutional Court, are among the hundreds of bills passed by Parliament over the past 18 months and signed by Schmitt.

The pressure on Schmitt had been building up. Tivadar Tulassay, the head of Semmelweis University, resigned Sunday saying he had backed the decision to revoke Schmitt’s degree but lost the confidence of the Ministry of National Resources, which oversees educational affairs.

Orban himself had avoided the issue by saying the president enjoyed immunity and that only Schmitt himself could decide to resign.

During most of his speech Monday, Schmitt defended his doctorate and said he would appeal its revocation at the university and, if needed, in the courts.

“This is a matter of honor, and my conscience is clear,” Schmitt said, adding that he was the
victim of a political attack. He said would write a new doctoral dissertation about the relationship between sports and environmental protection.

Schmitt is the first Hungarian president to resign since the end of communism in 1990. Socialist Prime Minister Ferenc Gyurcsany resigned in 2009, a few months after Hungary received a $26.6 billion bailout from the IMF.

Published on Tuesday April 3, 2012 as: Plagarism forces president of Hungary to step down

LONDON (AP) — Markets were in a cautious mood on Monday as talks dragged on between Greek political leaders over a fresh austerity package that is required if the debt-ridden country is to get a crucial bailout package.

Even though another round of deadlines have passed, the prevailing mood in the markets is that Greece will get a debt-reduction deal with its private creditors as well as a second bailout from its partners in the eurozone and the International Monetary Fund.

However, as one deadline after another is missed, some traders are preparing for the worst — a disorderly debt default that could send shockwaves round the global economy.

The leaders of the parties backing Greece’s coalition government, which is headed by Prime Minister Lucas Papademos, were to hold a second day of emergency talks over austerity measures that rescue creditors are demanding in return for more money. The talks, however, were postponed until Tuesday despite pressure from the European Union for a speedy agreement so that the country can avoid a default on its debt.

Greek politicians are balking at the level of austerity demanded by the country’s bailout lenders. The three party leaders have publicly opposed steep cuts in public sector pay demanded by the eurozone and International Monetary Fund, but their backing is needed for the government to reach a deal for a euro130 billion ($170 billion) bailout.

“While we still believe that a voluntary Greek debt restructuring deal and further EU aid will be forthcoming, the risks of a more disruptive scenario have probably increased,” said Vassili Serebriakov, an analyst at Wells Fargo Bank.

In Europe, the FTSE 100 index of leading British shares closed down 0.2 percent at 5,892.20 while Germany’s DAX was flat at 6,764.83. The CAC-40 in France ended 0.6 percent lower at 3,405.27.

On Wall Street, the Dow Jones industrial average was down 0.3 percent at 12,822.38 while the broader Standard & Poor’s 500 index was 0.2 percent lower at 1,341.82.

So far this year, the mood in markets has been particularly upbeat, especially compared with the febrile trading that marked 2011. Stocks have rallied — many indexes are at their highest levels in months — while the cost of borrowing for key euro countries, such as Italy and Spain, has eased to levels that are considered sustainable in the long-run.

One of the reasons behind the change in tone has been optimism that Greek Prime Minister Lucas Papademos, who is due to meet with negotiators from the eurozone and the International Monetary Fund later Monday, will secure the second bailout.

The euro130 billion ($171 billion) bailout deal is vital for Greece to avoid bankruptcy next month as it cannot cover a euro14.5 billion ($19.1 billion) bond repayment due March 20 without the rescue funds.

The bailout’s implementation also depends on Greece’s progress in separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt, in exchange for a cash payment and new bonds with more lenient repayment terms.

Another key prop to the improvement in market sentiment this year has been a run of solid economic data out of the U.S., which has prompted some analysts to revise up their expectations for growth in the world’s largest economy. The improving trend was evident last Friday, when government figures showed the U.S. economy generated a bigger than expected 243,000 jobs in January, pushing the unemployment rate down to 8.3 percent.

The euro was under pressure as investors awaited developments in Athens — the currency was trading 0.1 percent lower at $1.3109.

Oil prices tracked the broader market trends Monday, with benchmark oil for March delivery down 58 cents at $97.26 a barrel in electronic trading on the New York Mercantile Exchange.

Greece will likely remain the focal point over the week, though a raft of corporate earnings, particularly in Europe, and central bank meetings could garner some interest. The European Central Bank’s monthly policy meeting on Thursday could be crucial in determining market expectations of whether there will be further interest rate reductions. Meanwhile, many traders think the Bank of England will clear the way to inject more money into the U.K. economy in the hope of boosting lending.

Earlier Asian shares mostly traded higher as investors there had their first chance to respond to join in the advance generated by Friday’s upbeat jobs data.

Japan’s Nikkei 225 index rose 1.1 percent to close at 8,929.20, its highest closing in more than three months but Hong Kong’s Hang Seng lost 0.2 percent to 20,709.94. Benchmarks in Singapore and mainland China also rose.

BRUSSELS — Eurozone ministers offered Greece €8 billion ($10.7 billion) Christmas rescue package Tuesday to stem an immediate cash crisis yet failed to resolve fears that the common euro currency might be doomed.

The 17 finance ministers insisted they found a veneer of credibility to coat the euro’s rescue fund with enough leverage to deal with potential financial crises much bigger than the one facing peripheral Greece. And they called on the International Monetary Fund for resources to help further protect Europe’s embattled currency.

“We made important progress on a number of fronts,” Jean-Claude Juncker, the eurozone chief, said late Tuesday.

After saying earlier that the eurozone’s rescue fund would be able to leverage up to one €1 trillion ($1.3 trillion), the fund’s chief remained vague on how beefed up it was after Tuesday’s meeting in Brussels. Klaus Regling said it would grow according to demands and market conditions, but assured reporters it was more than big enough to deal with Europe’s immediate financial debt problems.

Still, making progress on the fund — a firewall to keep Europe’s debt problems from engulfing nation after nation — “shows our complete determination to do whatever it takes to safeguard the financial stability of the euro,” Juncker said.

Italy remained an enormous concern. Carrying five times as much debt as Greece, Italy was battered for the third straight day in the bond markets, seeing its borrowing rates soar to unsustainable levels of 7.56 percent. Investors appear increasingly wary of the country’s chances of avoiding default — and making matters worse, the eurozone’s third largest economy is deemed to big for Europe to bail out.

The ministers still insisted Italy’s new prime minister would come through, saying he has promised to balance Italy’s budget by 2013.

“We have full confidence that Mario Monti will be able to deliver this program,” Juncker said.