WORLD
Act now to avoid crisis, IMF warns
An existing austerity drive by authorities to contain pension costs and better target social benefits was the minimum that could be done to get the situation in order, said assistant director in the European Department Erik Jan de Vrijer.
"We think the situation at the moment is very serious. The fact that the government cannot access the capital markets is very serious and the risks to the banking sector compound that," he said. "The first priority for Cyprus is to do all it can to avoid that these problems get out of hand."
Worries have grown since a July munitions explosion that crippled its largest power plant that Cyprus`s tiny economy could be the fourth in the euro zone to need a bailout.
Asked about the IMF`s evaluation of the risk Cyprus may require a bailout, De Vrijer said: "I think that there is time, and there is opportunity for the government to take decisive action to avert the possibility of these problems getting worse and worse."
"We are saying the situation is serious and it demands a strong policy response," said De Vrijer, who was on an IMF consultation mission to Cyprus.