By James Saft
(Reuters) – The International Monetary Fund may emerge from its meeting this week with more firepower but less force.
While the fund is looking on track to add at least the $400 billion it has argued it needs to deal with the potential fallout from the euro zone crisis, it will have to cope with a U.S. which is partly sidelined by domestic politics during a period of rising international economic tension and protectionism.
Even the $400 billion is a downgrade from a $600 billion figure bandied about earlier. IMF Managing Director Christine Lagarde has been busily putting a positive gloss on the shortfall, arguing that matters have improved substantially in Europe since the bigger figure was suggested.
Japan, Norway, Denmark and Sweden have pledged a combined $86 billion but the IMF will have to make shift without additional money from the U.S., where ponying up more cash during election season is considered politically unwise.
That is causing difficulties in raising cash from emerging market states, which want more power over the IMF to go along with bigger financial commitments, a step requiring U.S. congressional approval which simply isn’t going to happen this year.