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IMF: Europe must deal with Greece or suffer

 
 
 
 
 
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Trojan horse: IMF has warned the Greek crisis could spark a new financial panic.

Europe’s political elite is ‘playing with fire’ through its failure to tackle the economic crisis engulfing Greece, the International Monetary Fund has warned.

The Washington-based watchdog predicted that a fresh round of turmoil would spread through financial markets unless European leaders shore up the stricken eurozone periphery.

In its quarterly health check on the global economy, the IMF said the US government must also stop ducking the tough decisions required to rein in its vast budget deficit.

IMF director Jose Vinals said: ‘You cannot afford to have a world economy where these important decisions are postponed because you’re really playing with fire.’

Unless these dangers are addressed head on, new ‘shocks’ could ‘reverberate across the rest of the world’, which would in turn ‘seriously impair’ the ability of banks to raise funds, according to the IMF.

The stark message to European Union leaders came as Germany and France attempted to show a united front over a second rescue deal for stricken Greece.

Chancellor Angela Merkel backed down from German demands that creditors to the Mediterranean nation should have to shoulder a ‘substantial’ share of the mooted €150bn bailout.

In an embarrassing climb-down, Merkel outlined a new plan centred on persuading bondholders to take some of the strain on a ‘voluntary’ basis. This would mean giving Greece more time to pay back its loans.

The compromise deal eased fears of an imminent debt default by Greece, which would likely have triggered a wave of panic on financial markets. The FTSE 100 reversed early losses to close 16.13 points higher at 5714.94 while Greek borrowing costs falling back from record highs. Conflict between France and Germany had jeopardised a £10bn handout from the EU and IMF, which Greece urgently needs if it is to avoid reneging on its debt.

Before the cash is disbursed, the Athens government must first pass a new package of harsh and deeply unpopular austerity cuts.

Greek Prime Minister George Papandreou yesterday replaced his finance minister in a broad cabinet re-shuffle ahead of a make-or-break confidence vote tomorrow.

Should he lose, the IMF could in theory withhold their portion of the bailout cash. But the president of the European Council yesterday on Friday he was confident a fresh bailout deal for Greece would be hammered would.

‘This is no time for party politics, there is too much at stake,’ Herman Van Rompuy said.

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One Response to " IMF: Europe must deal with Greece or suffer "

  1. JanB says:

    Anyone who thinks the IMF is an independent organization to “help” countries improve their economy, better watches three short movies about ESF, the organization behind the IMF, how it is controlled, the “gold = sold” issue, and the planned cost for taxpayers all over the world that is in progress, unless action is taken:

    http://www.marketskeptics.com/2011/06/the-esf-and-its-history.html

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    Rating: +1 (from 1 vote)

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