The Washington Post

To the Rescue
THE OBAMA ADMINISTRATION WISELY PLEDGES TO BOLSTER THE IMF.

Friday, March 13, 2009

ADD THE PLIGHT of Eastern Europe to the many threats facing the world
economy. Having boomed in recent years thanks to imported capital, much
of it provided by Western European banks, country after country is now
going bust because of the contraction of credit. This not only poses
risks to global trade and growth; it also raises concerns about their
future survival as democracies within the European Union. In the largest
of the Eastern European states, Ukraine, a former Soviet republic that
does not enjoy the political benefits of E.U. membership, the stakes are
especially high. There, industrial production has plunged by almost a
third since the beginning of the crisis; living standards for 46 million
people are starting to collapse. The weaker and more chaotic Ukraine
becomes, the likelier it is that Russia will attempt to reassert
hegemony over it. A Putinized Ukraine would be a disaster for that
country, Europe and the United States.

The Obama administration has announced an important step toward
salvaging emerging markets, including Eastern Europe: Treasury Secretary
Timothy F. Geithner's proposal to triple the International Monetary
Fund's resources from their current level of about $250 billion. Of
that, $100 billion would come from the United States. Congress may balk
at this number; already feeling bailout fatigue with respect to U.S.
banks and auto companies, many lawmakers may wonder why they need to aid
other countries. The answer is that the crisis is global, and so the
solution has to be global; Congress must provide funding lest economic
rot spread through not only Eastern Europe but also Asia, Latin America
and Africa. The IMF is the only institution capable of doing the job.

Other countries must do their share. Some already have: Mr. Geithner was
following the example set by Japan, which is suffering a steeper
downturn than the United States but still found $100 billion to spare.
The Obama administration correctly seeks greater contributions from
cash-rich China and Saudi Arabia. If modifications to IMF governance are
necessary to secure their participation, that should be considered. The
disappointment so far is the European Union, whose Western European
members are not eager to bail out the East. But it will be harder for
them to delay now that the Obama administration has stepped up. Indeed,
Western Europe is likely to come around eventually, if only to prevent
the collapse of the European Union's Eastern half from turning into a
collapse of the alliance itself.

For Ukraine, however, the United States will have to lead. That includes
encouraging Ukraine's leaders to control the political squabbling
between Prime Minister Yulia Tymoshenko and President Viktor Yushchenko
that so far has thwarted the formulation of a new economic program
necessary to secure international aid. Consequently, the IMF recently
withheld the second installment of a planned $16.4 billion loan.
Washington needs not only to supply money but also to push for political
cohesion and responsibility among the politicians in Kiev. All the IMF
money in the world can't save them unless they can agree on how to help
themselves.