Managing Director of the IMF Christine Lagarde meets China's Vice Premier Wang Qishan, Beijing, China. Photo: International Monetary Fund (flickr)

The global financial crisis has shaken up the international seating chart, and China may be vying for a better spot.

Though China was one of the International Monetary Fund’s original members, that invitation to the table didn’t mean it had a voice in the conversation. But last year, the World Bank and IMF both moved the country to third place. While the move changes the pecking order for Germany, the UK and France, traditional leaders, it matches China’s increasing position in the world economy with voting power.

Now, we wait to learn whether China will use its power to ease the Eurozone crisis. The IMF, typically the lender of last resort for sovereign states, needs more capital to provide the kind of liquidity Europe needs. China has that liquidity. In loaning to the IMF to play middleman, China can keep itself out of European politics, while keeping world economies - and important European trading partners - humming.

China’s funds would go far. Just last week, the New York Times reported, the IMF offered an additional short-term credit to “bystanders” - member nations feeling the “contagion" of regional and global default. One tool is a “precautionary and liquidity” credit line that would help countries approved by the Fund as having sound economic policies to meet short-term payments. The other new tool combines emergency disaster and post-conflict relief under a new rapid-financing instrument, which can now also be used after exogenous shocks like global financial crises.

The announcement immediately reversed earlier market slides the same day, showing the move boosted investor confidence, according to the Times. But if even a few countries take up the IMF on its offer, its account will soon run dry.

If that happens, China and its ocean of cash will be waiting. The country has shown signs that it’s at least willing to play, but it remains to be seen what rules it will follow. With Western economies looking increasingly desperate, China has the opportunity to play tough. Its decision could relieve the global economy, but it could also help put a new country at the head of the table.

The EU-IMF team's arrival in Dublin was watched by both local news and civilian protestors. Photo: William Murphy (flickr)

As of November Ireland joined the ranks of Greece and Portugal as the latest European country to accept a bailout. The country’s economic crisis of 2008 led individuals and companies to begin pulling their funds from Irish banks, with net result of 70 billion euros withdrawn in 2010.

The proposed $113 billion IMF loan prompted protests in Dublin, says The Guardian. Not unexpectedly, some are viewing Ireland's economic situation as part of one homogenous crisis.

But is it really logical to group Ireland troubles with Greece, Spain and Portugal? Given the domino effect occurring in Europe concerning bailouts, the parallels seem unavoidable, however The Financial Times finds the comparison illogical.

Ireland is nothing like Greece. Back in 2007, Ireland’s net public debt was just 12 percent of gross domestic product. This compares with 50 percent in Germany and 80 percent in Greece. Spain, too, had net public debt in 2007 at just 27 percent of GDP."

Ireland in reality is unlike the other European nations that have accepted bailouts. As The New Yorker explains, Ireland’s economy went sour for different reasons than Greece and Portugal. A combination of the property market’s collapse and bailing out the banks sent Ireland into this economic pit.

It’s more realistic to compare Ireland with Iceland, argues a recent article from The Economist. The article suggests the government of Ireland would do well to learn from the more conservative approach taken by Iceland's government in repairing their economy. Iceland didn’t elect to bail out its banks and saw a 15-percent drop in GDP, compared with Ireland's 14-precent drop in GDP despite bailing out their banks. Iceland, however, not being a member-country of the European Union was spared the political pressure the government of Ireland felt to accept an IMF bailout.

Ireland's economic issues, according to The New Yorker, have shown that their membership to the EU may very well be their plight. And in reality the advice streaming from Germany, France and the United Kingdom has been of little help. Cutting government spending and raising taxes reduces demand in the economy, which makes recessions worse, explains The New Yorker.

Ireland doesn't have an economy that will yield positive results from the advice dispensed by their European counterparts according to. NPR notes that when a nation as small as Ireland — with a population 4 million — has an unemployment rate of 14 percent, it makes a noticeable dent in the workforce [discuss]. According to The New Yorker, the country is in dire need of both foreign and government investment to create jobs and combat unemployment. Unfortunately neither are possible given Ireland's shaky economic condition and the government's consistent inability to stabilize the crisis.

Yesterday, the The Financial Times wrote about plans to sell Ireland's debt in the form of euro zone bonds. But will this really stem the crisis? The Financial Times argues that instead of improving the situation, this will put other euro zone members attempting to sell their bonds at a disadvantage.

A government deeply in debt is limited in it ability to implement public programs that would benefit the young and old by providing services such as education and health care. Photo: Matthew DeGalan/Mercy Corps

Recently, international creditors forgave almost $20 billion in foreign debt amassed by the Democratic Republic of the Congo. The debt was mostly accumulated under the former president, Mobutu Sese Seko, and is considered odious debt as the money was used for the President's personal amusement rather than for the benefit of the populace.

The timing of Congo's debt relief is fortuitous as the country's economy needs as much help as it can get. The country consistently lands near the bottom of the World Bank’s “Ease of Doing Business” rankings and is plagued by persistent internal conflict.

But maybe the DRC just got its big break: escaping the chains of debt may allow the country to take the first steps towards economic development and progress. The head of the central bank and monetary policy committee, Jean-Louis Kayembe wa Kayembe, certainly thinks so.

[The] cancellation of the debt which have a positive impact on central bank reserves and will also allow the state to create budgetary space...for the battle against poverty and for infrastructure, given a durable growth for the wellbeing of the population.

There are some concerns about corruption, governance and human rights abuses in the DRC. Critics argue that debt cancellation should have been used as leverage to encourage reform in the country. However, debt relief should allow for some improvements in the government's ability to implement more progressive and pro-poor policies.

Managing Director of IMF Dominique Strauss-Kahn speaks at the World Bank/IMF spring meeting of 2009. Photo: World Bank Photo Collection (Flickr)

Earlier today the International Monetary Fund (IMF) announced plans to provide up to $17 billion in desperately-needed assistance to poor nations over the next five years. IMF managing director Dominique Strauss-Kahn was quoted in a press release that outlined the details of this historic response by the fund.

This is an unprecedented scaling up of IMF support for the poorest countries, in sub-Saharan Africa and all over the world... The G20 asked the Fund to help respond to the global economic crisis, which has hit the low-income nations so hard, and we are responding with a historic set of actions in terms of support for the world’s poor. The new resources and new means of delivering them should help prevent millions of people from falling into poverty.