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IMF says debt-hit euro states need 'unrelenting' reform | IMF says debt-hit euro states need 'unrelenting' reform |
(about 6 hours later) | |
Debt-hit states on the fringes of the eurozone need "unrelenting" reform efforts to try to prevent the current crisis spreading, the IMF has warned. | Debt-hit states on the fringes of the eurozone need "unrelenting" reform efforts to try to prevent the current crisis spreading, the IMF has warned. |
Greece and the Irish Republic have needed bail-outs, and Portugal is also now asking for assistance. | Greece and the Irish Republic have needed bail-outs, and Portugal is also now asking for assistance. |
The IMF has also called on the European Central Bank (ECB) to refrain from increasing interest rates further. | The IMF has also called on the European Central Bank (ECB) to refrain from increasing interest rates further. |
And it urged the EU and member states to strengthen banks that need bigger cash cushions against another downturn. | And it urged the EU and member states to strengthen banks that need bigger cash cushions against another downturn. |
The IMF estimates that the 17 member eurozone will see economic growth of 1.7% this year and 1.9% in 2012, if debt crises do not harm the economy. | The IMF estimates that the 17 member eurozone will see economic growth of 1.7% this year and 1.9% in 2012, if debt crises do not harm the economy. |
'Contagion' risk | 'Contagion' risk |
"Unrelenting reform efforts at the national level of the crisis-afflicted countries need to be the first line of defence," the report from the Washington-based organisation said. | "Unrelenting reform efforts at the national level of the crisis-afflicted countries need to be the first line of defence," the report from the Washington-based organisation said. |
"Contagion to the core euro area, and then onward to emerging Europe, remains a tangible downside risk." | "Contagion to the core euro area, and then onward to emerging Europe, remains a tangible downside risk." |
The Irish Republic and Greece are already dependent on 52.5bn euros ($74.44bn; £45.7bn) of International Money Fund aid. | The Irish Republic and Greece are already dependent on 52.5bn euros ($74.44bn; £45.7bn) of International Money Fund aid. |
Meanwhile Portugal's bail-out is expected to be worth 78bn euros in the form of loans from other European countries and the IMF. | Meanwhile Portugal's bail-out is expected to be worth 78bn euros in the form of loans from other European countries and the IMF. |
Many banks in these troubled nations are also being kept afloat by liquidity provided by the ECB. | Many banks in these troubled nations are also being kept afloat by liquidity provided by the ECB. |
Greek questions | |
Meanwhile, on Thursday IMF director for Europe Antonio Borges said that its most recent appraisal of the situation was that Greece did not have to restructure its debt. | |
However that assessment was made in February, and a new audit of its books is being carried out by experts from the IMF, ECB, and EU. | |
Analysts meanwhile have issued further warnings about the health of Greece's finances. | |
"As a result of weak growth and sizeable fiscal slippages, Greece has reached the point where, under realistic scenarios, debt dynamics are unsustainable," a research note from Barclays Capital said. | |
"The countdown to restructuring has started, in our view." | |
Detail required | Detail required |
The IMF also called on European leaders to bolster the powers of the European Financial Stability Facility (EFSF), and its 2013 replacement, the European Stability Mechanism (ESM). | The IMF also called on European leaders to bolster the powers of the European Financial Stability Facility (EFSF), and its 2013 replacement, the European Stability Mechanism (ESM). |
"Commitments have been made to improving lending capacity and pricing under the EFSF," the IMF said. | "Commitments have been made to improving lending capacity and pricing under the EFSF," the IMF said. |
"Making those commitments operational by filling in the still-missing specifics is now essential." | "Making those commitments operational by filling in the still-missing specifics is now essential." |
The IMF also said there was no need for further interest rate increases by the European Central Bank (ECB). | The IMF also said there was no need for further interest rate increases by the European Central Bank (ECB). |
In April, the ECB increased eurozone rates to 1.25% from the record low of 1%. | In April, the ECB increased eurozone rates to 1.25% from the record low of 1%. |
The IMF said continued eurozone worries may mean the ECB would have to continue providing limit-free liquidity to the region's banks. | The IMF said continued eurozone worries may mean the ECB would have to continue providing limit-free liquidity to the region's banks. |
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