In­crease Euro­pean res­cue fund, IMF urges

The Pak Banker - - Company& -

NEW YORK: Euro­pean lead­ers are fac­ing fresh de­mands to in­crease the size of their res­cue fund as the fi­nan­cial mar­kets con­tinue to threaten the weak­est mem­bers of the eu­ro­zone.

The In­ter­na­tional Mon­e­tary Fund has urged the EU to pump more re­sources into its bailout pro­gramme, and also to buy up more govern­ment debt. Oth­er­wise, the IMF warned, the cri­sis could es­ca­late - threat­en­ing the sta­bil­ity of the euro.

"The re­cov­ery could still stay the course, but this sce­nario could now eas­ily be de­railed by the re­newed fi­nan­cial mar­ket turmoil," warned the IMF in a re­port that will be pre­sented to eu­ro­zone fi­nance min­is­ters to­day at a gath­er­ing in Brus­sels.

The EU cur­rently has around €750bn (£635bn) at its dis­posal to sta­bilise trou­bled economies, in­clud­ing €440bn in the Euro­pean Fi­nan­cial Sta­bil­ity Fa­cil­ity (EFSF), and €250bn pledged by the IMF. An­a­lysts have al­ready warned that this will not be enough to sup­port Spain and Por­tu­gal, if needed. Bel­gian fi­nance min­is­ter Didier Reyn­ders has sup­ported the sug­ges­tion that the EU needs more fire­power, but in­sisted that the IMF must also dip into its re­serves.

"If one dou­bles the (EU) fund, then the IMF must do the same," Reyn­ders said.

To­day's meet­ing will be dom­i­nated by the fu­ture of the sin­gle cur­rency, with the cost of in­sur­ing the debt of Spain, Por­tu­gal, Ire­land, Greece and Bel­gium all ris­ing to­day. A split has al­ready ap­peared be­tween the fi­nance min­is­ters over the sug­ges­tion that they should col­lec­tively is­sue debt - dubbed E-bonds.

Jean-Claude Juncker, prime min­is­ter and trea­sury min­is­ter of Lux­em­bourg, and Gi­ulio Tre­monti, Italy's min­is­ter of econ­omy and fi­nance, ar­gue that Euro­pean bonds would boost liq­uid­ity, and al­low coun­tries in dif­fi­cul­ties to con­tinue to bor­row - re­mov­ing the need for a bailout.

"We be­lieve this pro­posal pro­vides a strong, cred­i­ble and timely re­sponse to the on­go­ing sov­er­eign debt cri­sis. It would en­dow the EU with a ro­bust and com­pre­hen­sive frame­work that not only ad­dressed the is­sue of cri­sis res­o­lu­tion but also con­trib­uted to the pre­ven­tion of fu­ture crises by fos­ter­ing fis­cal dis­ci­pline, sup­port­ing eco­nomic growth and deep­en­ing Euro­pean in­te­gra­tion," Juncker and Tre­monti wrote in an ar­ti­cle for the Fi­nan­cial Times. -PB News

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