Every country has to contribute to resolving the financial crisis in the Eurozone, Finance Minister Pravin Gordhan said on Wednesday.
“There was a recognition that we are all in this together… even the Brics [Brazil, Russia, India, China, South Africa group of economies] countries can’t set themselves apart from the solution,” he said in Pretoria.
He was briefing local media following a meeting of finance ministers in Washington last week, which he chaired.
The meeting was held at the International Monetary Fund’s (IMF) headquarters during the annual meetings of the World Bank Group and the IMF.
It came at a time when a debt crisis in Greece threatened the survival of the Eurozone, and could spread to Spain and Italy.
‘Contagion’
Gordhan said there was recognition at the meeting that no one wanted the contagion from the Eurozone to spread and damage other economies around the world.
He said the source of the world’s economic optimism came from the developing markets where there was growth, and this should not be damaged in any way.
It was key that Europe should take the lead and give effect to the bail-out packages it had decided on, on July 21, he said.
However, all countries, possibly through the IMF, needed to ensure that international agencies had sufficient “firepower” to resolve the crisis, he said.
This could mean increasing the $400-billion that the IMF now had, to a much higher amount so that it could play a more active role in resolving the crisis.
“Then each of the members of the IMF… will have to make a contribution to that. .. for us [South Africa] that means a couple of hundred million dollars,” Gordhan said.
“Some of the calculations floating around in Washington… [are] that if this crisis spreads to Italy and Spain, you’d need over $2-trillion to be able to intervene within that environment.”
Gordhan said the meeting recognised a very urgent need to contain the ripples of the European crisis.
There was also a recognition that “we are living in a dangerous world”.
South Africa needed to do enough to save current jobs and prevent further job losses.
“We’re working on this as government,” he said.
Gordhan said manufacturing jobs in South Africa could be affected by what was happening in the Eurozone.
The Eurozone economy was expected to grow 1.6% in 2011 and contract to 1.1% in 2012, leading to diminished demand, he said.
South Africa’s safeguard would be trade with the East, particularly China, and the rest of Africa.
“Our businesses need to do more business with Africa, where there are still substantial levels of growth,” Gordhan said. — Sapa