Eurozone threat looms over IMF meeting

EU’s failure to resolve Greek problem adds to tensions as world’s finance ministers and central bankers gather at IMF Investors are poised for another week of turmoil in the global financial markets as finance ministers and central bankers gather in Washington for the International Monetary Fund’s annual meeting amid the biggest crisis since the collapse of Lehman Brothers three years ago. A weekend meeting of EU finance ministers in Poland failed to resolve any of the issues in the beleaguered eurozone, instead casting more doubt over the future of Greece by delaying a decision on a much needed €8bn (£7bn) bailout payment until next month. Reports in Greece suggested the EU, IMF and European Central Bank were asking for further austerity measures, including 100,000 public sector job cuts, in an attempt to resolve Greece’s budget deficit and avoid a default. Greece’s prime minister, George Papandreou, who has cancelled plans to attend the IMF meeting in favour of dealing with the crisis, held an emergency cabinet meeting on Sunday to discuss additional cutbacks before a conference call with the EU and the IMF on Monday. Meanwhile Moody’s is expected to announce imminently whether it plans to downgrade Italy’s credit rating, a move that would escalate the European debt crisis and cause problems for French banks exposed to the country’s debt. Many observers believe last week’s news of a co-ordinated plan by five central banks to pump dollars into the system was designed to improve liquidity in the event of further turmoil. But the political pressures within the eurozone were in focus once more following a predicted defeat for German chancellor Angela Merkel in another state election at the weekend. Sony Kapoor, of the economic policy thinktank Re-Define, said: “The inability of EU leaders to handle the problem of Greece, one of the smaller economies in the EU, does little to inspire confidence in their capacity to tackle the much larger threat posed by the continuing failure of Italy and Spain to be able to refinance themselves at reasonable costs.” Before its annual meeting on Friday, the IMF is likely to cut its growth forecasts for the global economy in the wake of the instability in Europe. At the meeting itself, US treasury secretary Timothy Geithner is expected to repeat his calls for Europe to stop bickering and take action to tackle the debt crisis, comments that annoyed some EU officials when he made them in Poland on Friday because of America’s own debt troubles. Elsewhere, Adam Posen, a member of the Bank of England’s monetary policy committee, said the eurozone crisis was the biggest single threat to the global economy. He told Sky News: “It is bigger for the UK than for the US or for other people who are not as tightly tied to Europe. We’re all tied to western Europe, we’re all tied financially, politically, economically, commercially.” Posen said Bank officials, including its governor Mervyn King, were working “very hard to make sure we know where all the linkages are”, adding that banks were as well capitalised as they could be. He also said that Europe’s debt problem was solvable and the rich countries of central Europe should take the loss to alleviate the fear across markets. European debt crisis European banks Bank of England Economics Euro European Union Greece Europe Nick Fletcher guardian.co.uk

Posted by on September 18, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.