IMF: Euro in shadow over EU debt crisis*
Tue Jul 19, 2011
The International Monetary Fund (IMF) has warned in a report that the ongoing EU debt crisis has put the euro in a “shadow,” indicating that the currency is in jeopardy.
With European leaders struggling to agree how to divide the costs of another Greek rescue program, the IMF said on Tuesday that there was “no consistent road map ahead, leaving both orderly and disorderly outcomes on the table. The reaction by national authorities and economic agents has been one of retrenchment, threatening to turn back the clock on economic and financial integration, the very foundation of [the Economic and Monetary Union],” or EMU, The Washington Post reported.
Europe has been vexed by financial crisis as the 17-nation euro zone has been plunging into the abyss fissures between strong economies such as Germany, and weaker ones such as Greece, Ireland and Portugal, which risk being engulfed by historic levels of government debt.
European leaders will hold talks in Brussels on Thursday in an effort to develop a durable fix for the euro. Their summit has been dubbed the euro zone's “last chance saloon” by the London-based Capital Economics.
Leaders have not ruled out the possibility of a breakup of the euro zone, but they mentioned that such a move would end ambitions for a European currency to challenge the dollar as a world reserve and, depending on which countries stay in or leave the currency union, possibly would force a major reordering of world finances, the report said.
The discussion about the probable breakup was introduced to the IMF group since Greece's problems became acute in the fall of 2009.
In a study presented to the IMF, ING -- a financial institution of Dutch origin -- chief economist, Mark Cliffe, in London estimated that Greece's economic output might fall as much as 10 percent if it pulled out of the currency union, making the breakup really costly.
The IMF has cited the euro zone's problems as "perhaps the chief risk to the global economic recovery."
Analysts at Capital Economics said that "a very decisive response which could be applied not just to Greece but also to Spain and Italy" was essential. Otherwise, they said, the situation could become "irretrievable."
* Url:http://www.presstv.ir/detail/189881.html
