LONDON (MNI) – The euro zone’s sovereign crisis is not over yet and
it is taking too long to repair the area’s banking sector, the head of
the International Monetary Fund warns today.
In a speech at the European Banking Congress in Frankfurt,
Dominique Strauss-Kahn says that cooperation between euro zone states is
moving too slowly:
“The area’s institutions were simply not up to the task of managing
a crisis-even setting up a temporary solution proved to be a drawn-out
process. In the end, they did what they needed to do, but the sovereign
crisis is not over”.
“In a sense, the wheels of cooperation move too slowly. Repairing
the financial sector is taking too long, in part because policymakers
are not paying enough attention to the pan-European dimension”.
The comments come as negotiations between the EU/IMF and Irish
policymakers on a package to rescue the country’s banking system look
set to continue through the weekend and into next week.
The IMF chief also warned that cooperation between EMU states on
fiscal policy also needed to be stepped up. He called for the EU
Commission be granted greater powers of surveillance and enforcement
over national budgets.
“Credible medium-term fiscal consolidation is crucial, with the
pace tailored to country circumstances. Different countries face
different challenges…”
Imbalances within the euro zone should be a source of concern as
much as global imbalances.
“It is simply not true that surpluses are good and deficits are
bad. For growth to be sustainable, current account deficits in some
European countries will need to shrink, and, in parallel, in other
countries-such as here in Germany, growth will need to become more
domestically driven”.
–London: 00 44 207 862 7492; email: dthomas@marketnews.com
[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]
