World Bank, IMF work for recovery, but cracks emerge

Outside the meetings there were clashes in the streets of Istanbul, Turkey's biggest city and commercial capital, between police and some 1,500 protesters. Around 100 protesters were arrested following the confrontations.

At annual meetings of the IMF and World Bank in the Turkish financial capital, Europe's largest economy, Germany, threw a spanner in the works of a plan to significantly boost the resources of the International Monetary Fund.

German central bank governor Axel Weber said the IMF's proposal for a massive increase in its resources so that it could function as a credible global bank of last resort for countries was fraught with risks.

“We are not convinced that the IMF should assume a general insurance function for public sector liabilities. This would risk setting the wrong incentives both for borrowers and investors,” he said.

Some IMF member states have pledged to increase the Washington-based institution's resources by more than US$500 billion (339.5 billion euros) to boost its lending capacity to countries hit by the global economic crisis.

Germany has lent US$15 billion to the IMF under this commitment.

The IMF has given out tens of billions of dollars (euros) of credit in recent months to prop up faltering economies around the world and the World Bank has stepped up its lending for 2009 to record levels.

Weber's statement cast a cloud over a recent decision by a committee representing the fund's members recommending an increase in IMF resources as the first day of the two-day meeting got under way.

Finance ministers and central bank governors from 186 nations hammered out strategies for sustainable growth and reform of the global financial system at the crux of the crisis.

IMF chief Dominique Strauss-Kahn earlier called for global economic cooperation that would build on efforts by the Group of 20 (G-20) over the past year and which have averted the collapse of the world economy.

“We seem to have pulled back from the brink, and even if as we all know it is much too early to declare victory, we have at least stepped onto the road of recovery,” the IMF managing director said.

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