IMF calls for euro action to avert global catastrophe
Baku, October 10 (AZERTAC). In its latest assessment of global financial stability, the IMF warned that the eurozone still poses the biggest risk as investor confidence in the world financial system has become "very fragile" since the fund`s last report in April.
The IMF praised "significant and continuing efforts" by the eurozone, including proposals for a "banking union", the creation of a €500bn (£403bn) bail-out fund, and a European Central Bank pledge "to do whatever it takes" to protect the single currency.
But, in an important message to EU leaders ahead of a Brussels summit on deepening fiscal integration, banking union and bank recapitalisation next week, the IMF issued a stark warning that the lack of decisive action by European governments and institutions risked tipping the global economy into deeper crisis.
The IMF is pressuring the EU not to back away from reforms to rapidly create a powerful new eurozone bank supervisor under the auspices of the ECB, including controversial proposals, opposed by Germany, for a European deposit insurance scheme.
The IMF has identified an "increase in macroeconomic risks" as investors flee southern European countries and move investments to the North or outside the eurozone, creating a new economic divide in Europe.
In signs that progress could be difficult, EU finance ministers meeting in Luxembourg failed to make progress on plans for banking union or proposals to use the euro`s bail-out fund to recapitalise banks.
Timothy Geithner, US Treasury Secretary, said Europe was "unlikely to be a support for the global economy for some years to come". He said the eurozone was on "a more promising path", but there was "a very hard road ahead".
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