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Europe turned to Asia and the Middle East for help yesterday as the financial crisis threatened to overwhelm Hungary and other ailing economies.
After talks with other Western leaders, Gordon Brown urged China and the oil-rich Gulf states to come up with hundreds of billions of dollars to aid countries struggling to survive.
Any help from the East is likely to come at a high price. China, Japan and the Gulf states are demanding more say in the way that the International Monetary Fund and the World Bank are run. Both organisations are dominated by America and Europe.
Mr Brown urged countries with big foreign exchange reserves to replenish the coffers of the IMF to facilitate loans to countries such as Iceland, Ukraine and Hungary. Many other ailing nations are expected to seek emergency aid.
The Prime Minister and other European leaders believe that the IMF’s current $250 billion (£157 billion) bail-out fund will be insufficient to tackle the crisis emerging in many countries, which makes the untapped reserves of the East so attractive. China, for example, has foreign exchange reserves of $1.9 trillion, compared with $213 billion for the eurozone as a whole.
Mr Brown said that he would raise the issue during a four-day trip to the Gulf starting on Saturday, when he will visit the leaders of Saudi Arabia, Qatar and the United Arab Emirates, which have all had multibillion-dollar boosts to their income from oil because of the recent price spike. He also plans to speak by phone with Wen Jiabao, the Prime Minister of China, which is sitting on a large capital reserve after a decade of expanding exports of consumer goods to the West.
Alistair Darling, the Chancellor, will argue tonight at the Mais Lecture that the emergence of a “new economic world order” shows the need for a new approach to maintain the stability of economies and financial markets.
Mr Brown said that in recent days that he had spoken with Dominique Strauss-Kahn, the IMF managing director, President Sarkozy of France and Angela Merkel, the German Chancellor, about his proposals, and that they were looking at similar ideas. He has also spoken to Ferenc Gyurcsany, the Hungarian Prime Minister.
“We have seen in recent days the financial crisis spreading to other countries – middle-income countries, Eastern European countries. Capital flight has made a number of countries potential victims of this crisis. So in the last few days I have discussed the risk of contagion and the need to stabilise economies right across Eastern Europe,” Mr Brown said.
The IMF has an arrangement known as the general agreement to borrow, under which countries with large reserves of cash make sums available to lend to states in financial difficulties. The fund has recently said that it has $250 billion available for use, Mr Brown said. But he added: “This may not be enough . . . It is becoming increasingly clear to me that we cannot delay and that we now need substantial additional resources.”
Asked whether Britain would contribute to the enhanced fund, he said: “We don’t rule out anything in this, because everybody has got to play their part in helping. But I think that, as happened in the Seventies, the big-surplus countries, those with big reserves, are in a position to help most and we will be urging them to do so.”
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The errant borrowing consumer can't pay it back, the bank can't pay it back, so now it is the taxpayer who is faced with paying it back. Politicians made it too easy to go bankrupt with little downside. Bankers made it too easy to borrow, and lenders had an ulterior motive - currency manipulation.
N Reed, London, UK
I don't think even 1.9 trillion dollars will be enough to bail out an international financial system designed by Western political and financial elites to enrich themselves. And how about the next inevitable crisis? China would do better look after its 500 million on less than US$2 a day.
Arthur, Beijing,
Great, never thought I would live to see the day the West went begging...I hope the Chinese and others can finally turn the tables on Western financial hegemony and make them dependent on the East for handouts. What goes round comes around...
A. Khan, Dubai, UAE
Gordon Brown is a waste of space end of. He got us into this and we need someone else to get us out...enter the tory party to take over government whic is what should have happened in 2005!
kyle smith, bristol, uk
I got a phone call from the States yesterday asking me what Socialism could do. First I had to differenciate Communism from Socialism and Labour ! Simple answer : one need a bit of socialisme, but not too much otherwise they are the best at spending what they don't have and then other peoples money.
E.Bee, Toulouse, France
Bet you regret selling off so much of our gold reserve now dont you Brown.
Chris, Rochdale, UK
smtay
Payback time? What good will that attitude do anyone? The West is Chinas biggest customer, so if we go down, we shall take you with us.
steve, watford, UK
Nat, Singapore,
You hit the nail on the head. Can remember d Olympic torch run protests; calls for boycott of the games etc. Also can't forget Ms.Sharon Stone's infamous "Karma" on Sichuan Quake. But Chinese leaders are great. They would probably move forward and do their duty as best they could.
Lim, Johor Bahru, Malaysia
Mr Brown would better urge british banks to stop covering their loss on the backs of east european economies by speculating on the exchange rate. Looks like the stage is set to bring all Eastern Europe at the will of IMF. Speculations don't work, no worries, they decrese ratings, thow in rumors etc.
filip, Bucharest, Romania
It is all so ridicule...
Let us have a clean bankrupt and restart with a medium of exchange that is not in the hands of politicians !
Are we living in party-dictatorship(s) ?
Peter, Berlin, Germany
Most of the Westerners on this comment thread seem rather ungrateful...
Don Saliente-Chang, Dubai, UAE
This is more about Brown trying to make himself appear to be a key figure on the world stage ahead of a by-election. Icelanders will be choking on their cod when they read about this, given that Gordon single-handedly finished off their economy by his inept actions 2 weeks ago.
David, London, UK
to be honest, yes, the west always condemns China for human right problem, however, as a chinese , I think this is a very good opportunity to raise the status of China in the World, and earn the respect from the World by lending money to those countries who need help.
China better grab this chance
Chung Hei Yeung, Newcastle upon Tyne, Britain
We seem to live in a pink bubble as many Hungarian people has no idea about the crisis in Hungary.
Well done for our goverment!
bulambuk, Szeged, Hungary
Exactly where in the speeches and the statements from the World Bank did anyone say that the West is going cap in hand to the East ?
Gordon Brown is concerned that the IMF although with $ 250 Billion to use to help countries in dire need, may just be used up given the "Global" crisis.
Howard Leech, Gdansk, Poland
Here we go again take the credit ,get someone else to pay and call it a moral compass
rogerb, bridport,
The west greedily sends its manufacturing east to save money, for the rich, we lend money stupidly to ourselves so that we can buy the products now made in the east and now we blame the east for having more money than us and try to tell them to lend it back to us, so we can waste yet more I guess.
C Smith, Norwich, UK
Thank goodness for Gordon's strong leadership. The greedy elites controlling China and the Middle East, fleecing us with high oil prices, should take some responsibility for once.
Mustafa, Edinburgh, UK
Fund a few more Chinese separatists and China might just give in. Then again China will probably give the money, not often do you get a chance to effectively control the economies of multiple European countries, they better hope China don't use the chance destroy Europe like the IMF did to Chile.
John, Toronto, Canada
People in the East have not forgotten the bitter and severe conditions imposed by IMF for financial rescue during the 1997 Economic Crisis. Wonder whether IMF have similar condecending attitude to the failed Western economies?
mojazu, shah alam, Malaysia
Hedge funds should pay for the bailouts of countries needing IMF help.
One hedge fund manager boasted in The Times on 8 July 2006 "I want to be known as the man who bankrupted Iceland".
Now his, and other hedge funds can finance the bail out , not the taxpayer. That's moral hazard,
John Collins, Bromley, Kent
Rich nations taking funds from nations with low incomes per capita whom should be investing these sums to improve the lives of their own citiens. Has the world gone mental?
Matt, Melbourne, Australia
I detest Labour & Brown as much as anyone but over the last 40 years or so the western democracies have been the ones paying out the development aid, IMF funding etc.
Lets see if some of the former benefactors are now prepared to help in return
If not stop all foreign aid & look after our own
Guy, London, UK
So now human now human rights violations,Tibetan autonomy etc.. and all the other crap take a back seat? These are the same guys who were demonising China just before and during the Olympics. When they have some use for them, they become VIPs again,,,,,
Nat, Singapore,
The flapping sound you can hear is the noise of globalisation coming home to roost. Trade surpluses in China have already been borrowed by Western banks and used by banks to lend against assets with inflated values. Recapitalisation by tax payers enables banks to repay China. China lends to IMF...
John Stobart, Oakham, Rutland, UK
Its amazing how broke the EU actually is only $213Bill in foreign trade reserves compared to China $1.9 Trill.
Time and Money is running out for useless Europe.
John, Perth , Australia
New Labour (prop. G Brown) has shafted the UK in its largely successful attempt to destroy the fabric of British society. Hopefully even the dumbed down British electorate has the wit to grasp this and perceive the bankrupt state of the nation, financial as well as intellectual
Paul, Saigon,
My grand father always used to say that the worst attribute of the Labor Party is its amazing ability to spend other people's money. He was of course refering to the tax dollars of the poor general public whom elect them - Gordon Brown's ridiculus comments now take this to a whole new level!
lex, Australia,
The best thing is these same genius from the US and Europe used to lecture Asian countries for their imprudent lending, subprime loans, the god-forbid government intervention in the financial markests and company bail-outs and now they have been doing exactly just that. Sheer Classic.
LL, Singapore,
Having spent our parents and grandparents money, we are now spending our chidrens and grand childrens. Do we really expect the Chinese to let us spend all theirs as well. I hope for the sake of the Martians their is no life on Mars. May be worth a try Gordon.
Steve, Sittingbourne, Kent
It is a symbiotic relationship -China also needs the US/West to continue to buy its exports @ prices kept low by the artificial XR to sustain its economic growth and prevent social unrest . Otherwise if trade sanctions are imposed or the currency was allowed to float freely-goodbye China!
Ian, Stirling, UK
smtay-
If the world goes into a recession China will have no place to sell its goods harming its economy, this has already started.Look at all the factories that have closed with huge job losses. Helping the other countries helps China. Blind patriotism helps no one, open your eyes.
Jon, Beijing, China
In the past, the west was always using human rights to force China to do something unreasonable, to Chinese goverment, to make the state stability is the first choice, to feed the whole nation is the basic problem. So, I hope the west should to ascertain Chinese situation.
Rockfiller, NanChang, Jiangxi ,China
Malcontents Brown & Co having successfully shafted the UK with their wayward policies of "No More Boom & Bust" which has brought poverty to us all forever; are now hell bent on a mission to sell us all into slavery to former enemies of the realm.
Willy Wallace must be awash with LAUGHTER!
Mike O Connor, Plymouth,
You've got to love these socialists in the UK. Help us we are broke, we spent all of our money, borrowed money we can't pay back..but you have worked hard, made lots of profits, saved lots of money, didn't borrow..why don't you give us your money? Brown used to lecture the Chinese to be like the UK
KR, Cap Ferrat, FRANCE
It's interesting that Europe is asking China for financial help after snubbing China over the Olympics and most recently, slapping China in the face by giving Europe's human rights prize to a China activist that the Chinese government opposes. I would encourage China to think about payback time. :)
smtay, Shanghai, China
He has some cheek does our Gordon. I hope they show him the door.
tris, dundee,