/ 21 June 2011

IMF confident of eurozone recovery

The IMF's acting managing director has said the recovery in the euro area was broadly sound, even though growth remained uneven and moderate overall.

Regardless of the crisis in the eurozone, ongoing efforts to secure a dynamic and resilient monetary union remain relevant and should be further strengthened, according to John Lipsky, the acting managing director of the International Monetary Fund (IMF).

Lipsky’s comments followed the conclusion of a meeting between the IMF and a group representing European Union member states on Monday.

Lipsky said that the recovery in the euro area was broadly sound, even though growth remained uneven and moderate overall. He noted, however, that the sovereign crisis on the periphery remained a risk.

“Clearly, only a cohesive and cooperative approach to crisis management will be successful,” said Lipsky, adding that determined commitment to reforms and adjustment must continue, including immediate and far-reaching structural reforms, privatisation, and the opening of markets to foreign ownership and competition.

The IMF called for a continuation of financial sector reform, saying it was imperative that the ongoing bank stress tests led to a fundamental strengthening of the capital positions of euro-area banks.

The euro area needed a more integrated financial stability framework, with strong common rules for regulation and supervision, and to continue to strengthen its economic governance, the financial institution said.

“This means more automatic rules, implemented within tighter deadlines,” he said.

The IMF expressed confidence that the spillovers from the ongoing difficulties in parts of the eurozone were relatively small, but that the crisis would be felt much more strongly around the world if it spread to the banks in the core of the euro area. — I-Net Bridge