The head of the International Monetary Fund Friday urged euro zone authorities to deploy the currency union’s bailout funds and the European Central Bank’s bond-buying program as part of an aggressive plan to tame its debt crisis.
Although IMF Managing Director Christine Lagarde didn’t refer to any particular country when prodding the EU to wield its crisis-fighting weapons, Spain is the only country in the euro zone that’s currently mulling whether and when to tap the bailout funds.
The EU this week came under renewed pressure from the world’s finance ministers and central bankers at the IMF’s annual meetings to act more quickly to tame a financial crisis threatening to slam the brakes on the global growth.
The ECB has said it’s prepared to pull the trigger on new program to buy bonds of ailing member countries, but only if they apply for a conditional bailout loan from the EUR500 billion European Stability Fund, which came online earlier this week.
Spain has taken advantage of the low borrowing rates purchased when the ECB announced its bond program last month by rolling over much of this year’s obligations. Applying for a loan is politically controversial for Madrid as it would have to cede a measure of economic sovereignty to the EU. But economists and IMF officials say it’s highly likely that it’s only a matter time before the country will be forced by market conditions to ask for a loan. Requesting assistance now, rather than waiting for another financial crunch, would not only cut the potential costs of the crisis-resolution, but prevent further deterioration in the rest of the euro zone.
“The ESM and the OMT need to be deployed, banking union advanced, and national authorities should implement strong policies to credibly ensure fiscal consolidation over the medium term,” Lagarde said in her report to the International Monetary and Financial Committee. The IMFC is the fund’s policy steering committee made up of finance ministers and central bank governors from 25 major advanced and industrialized economies.IMF’s Lagarde urges Europe to deploy bailout
Via – MarketWatch
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