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Luxembourg - The International Monetary Fund (IMF) has warned that Europe's debt crisis could have "large global spillovers" if no bolder action is taken.
The warning comes as the international crisis lender and the eurozone work on clearing the next €12bn instalment of bailout loans to Greece. The money is needed to keep Greece from defaulting on its debts and spreading financial turmoil by deterring lending by bond markets to other governments.
The IMF said the eurozone needs to expand the powers of its bailout fund and avoid any impression that bailouts mean debt restructuring that would hurt bondholders.
It said in a statement that "failure to undertake decisive action could rapidly spread tensions to the core of the euro area and result in large global spillovers".
The crisis is a threat to economic recovery and the eurozone must cooperate more to contain it and consolidate fiscally to restore confidence, the IMF said.
“A broadly sound recovery continues, but the sovereign crisis in the periphery threatens to overwhelm this favourable outlook, and much remains to be done to secure a dynamic and resilient monetary union,” the IMF said in a regular report on the 17 countries using the euro.
“A strong core is pulling ahead of a periphery facing daunting challenges, with very high debt levels, severe competitiveness problems, and fragile banking systems,” the IMF report said.
“Strong policy action by national authorities is a prerequisite, but should be backed by a truly cohesive approach from all euro area stakeholders. While courageous attempts have been made to address the crisis, policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome,” it said.
The warning comes as the international crisis lender and the eurozone work on clearing the next €12bn instalment of bailout loans to Greece. The money is needed to keep Greece from defaulting on its debts and spreading financial turmoil by deterring lending by bond markets to other governments.
The IMF said the eurozone needs to expand the powers of its bailout fund and avoid any impression that bailouts mean debt restructuring that would hurt bondholders.
It said in a statement that "failure to undertake decisive action could rapidly spread tensions to the core of the euro area and result in large global spillovers".
The crisis is a threat to economic recovery and the eurozone must cooperate more to contain it and consolidate fiscally to restore confidence, the IMF said.
“A broadly sound recovery continues, but the sovereign crisis in the periphery threatens to overwhelm this favourable outlook, and much remains to be done to secure a dynamic and resilient monetary union,” the IMF said in a regular report on the 17 countries using the euro.
“A strong core is pulling ahead of a periphery facing daunting challenges, with very high debt levels, severe competitiveness problems, and fragile banking systems,” the IMF report said.
“Strong policy action by national authorities is a prerequisite, but should be backed by a truly cohesive approach from all euro area stakeholders. While courageous attempts have been made to address the crisis, policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome,” it said.
