Tuesday, June 21, 2011

IMF: EU crisis a threat to world economy

The acting head of the International Monetary Fund, John Lipsky

Source: Press TV

The International Monetary Fund (IMF) says the mounting debt crisis in Europe is threatening the economic recovery throughout the world.

In a statement issued on Monday, the IMF warned that the ongoing crisis could have "large global spillovers" if decisive action is not taken, AP reported.

The IMF advised the eurozone to expand the powers of its bailout fund and further integrate its economic policies, stating that the failure to resolve the fiscal problems of the eurozone's periphery could rapidly spread tension to the core of the area.

Summarizing a report on the policies of the 17-country zone, the IMF said, "A broadly sound recovery continues, but the sovereign crisis in the periphery threatens to overwhelm this favorable outlook, and much remains to be done to secure a dynamic and resilient monetary union," adding, "Failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers.”

The eurozone periphery countries, particularly Greece and Spain, are facing daunting economic challenges with high debt levels, severe competitiveness problems, and fragile banking systems.

However, the acting head of the IMF, John Lipsky, said in a press conference in Luxembourg “We are not negotiating a new program… There always exists that possibility, but there has been no request by the Greek authorities to negotiate such a new program. We are concentrated today on the existing program and what is needed to put it back on track and to therefore allow the next disbursement.”

“Strong policy action by national authorities is a prerequisite, but should be backed by a truly cohesive approach from all euro area stakeholders,” he said.

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