South Africa hopes Europe will increase its bail-out fund and reassure global markets about resolving its deepening debt crisis that has led to a “most unwelcome” uncertainty, said Finance Minister Pravin Gordhan.
“We can only hope that by the time the (December meetings) are concluded, that we do have a sizeable fund, that individual European governments have taken the steps to move around the correct fiscal trajectory and that reassurances will be given to the market that the European leadership is capable of decisive action,” Gordhan said at a media briefing.
“If they are able to deal with the issues of … having a sizeable firewall in their fund and more decisively tackling some of the issues that are ahead of them, the spill over effects (to) economies like our own and many others around the world will be less damaging than they currently are.”
Euro zone ministers agreed on Tuesday to ramp up the firepower of their regional rescue fund and said they may turn to the International Monetary Fund for more help to resolve the debt crisis, Reuters reports.
The euro zone’s bailout fund, the European Financial Stability Facility (EFSF), has uncommitted resources of around 250 billion euros.
Partly due to the euro zone debt crisis, South Africa cut its 2011 growth forecast to 3.1 percent from 3.4 percent.
The economy grew less than expected in the third quarter as mining, manufacturing and agricultural sectors contracted, partly due to falling exports.
The Reserve Bank has said the European situation has raised the risk of stagflation in Africa’s largest economy.
If the European situation deteriorates further the central bank may have to consider cutting interest rates again, to add to 650 basis points worth of decreases done between November 2008 and Nov 2010.
South Africa needs an average 7 percent growth rate a year to create jobs for the quarter of the labour force that is unemployed.