‘Decisive action’ needed to complete euro project

European policymakers must take decisive action to complete eurozone monetary union, International Monetary Fund warns.

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by Chris Marshall on Jun 08, 2010 at 08:45

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‘Decisive action’ needed to complete euro project

European policymakers must take decisive action to complete the monetary union in the eurozone, the International Monetary Fund has warned.

The fund called for ‘fundamental reforms’, blaming the debt crisis sweeping the eurozone on ‘fiscally unsustainable policies in some countries, delayed repair of the financial system, insufficient progress in establishing the discipline and flexibility needed for a smooth functioning of monetary union, and deficient governance’.

The IMF’s warning came as investors took fright over new eurozone fears yesterday, with concerns growing that Hungary faces a Greek-style crisis.

In Germany chancellor Angela Merkel (pictured) announced what she described as the country’s largest programme of public sector cuts with plans to knock €80 billion off the budget between now and 2014.

Meanwhile, in Spain, public sector workers are reportedly holding a strike in protest against a 5% cut in pay.

In its report the IMF said that the immediate response to the crisis – which includes a €110 billion bailout for Greece and wider €750 billion eurozone package to which the IMF is contributing – was bold. But it added that crisis management is not an alternative to the corrective policy actions.

The IMF said that a one-size-fits-all fiscal adjustment strategy should not be imposed on the eurozone’s 16 member countries.

The adjustments countries must make ‘will inevitably entail comprehensive reforms to pension and health systems, and other entitlement programs, a process that is already well under way in many countries in emerging Europe that were hit hard by the crisis, and of course in Greece,’ it stated.

US Federal Reserve chairman Ben Bernanke also added to calls for European reform yesterday: ‘European leadership is strongly committed to doing whatever is necessary to preserve the euro, preserve the eurozone, preserve the European project, and avoid financial problems that would certainly arise,’ he said, according to Reuters.

Bernanke said that the eurozone rescue package was enough to protect Greece, Portugal and Spain from volatile credit markets for a number of years.

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4 comments so far. Why not have your say?

The architects of the Euro were either complete idiots or totally dishonest.

Monetary union was never going to work in the long run without fiscal and even political union.

They say the EU thrives on crises and this one is a golden opportunity for the federalists to complete their project. Either that or they simply have no understanding of economics.

The question is will complete union be acceptable to Europe's voters?

Will the South suffer multi-year austerity and even depression like conditions while the North funds them for years until they become competitive again?

Because we're getting to the stage where this is either make or break for the Euro and I'm not sure the appetite for sacrifice among the populace and politicians is really there.

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I feel I should be making some critical, incisive or even witty comment on this whole Euro come global banking disaster that has unfolded before our eyes that so many other contributors seem to manage so to do well and I enjoy reading, but the more I read the more dumb struck I become by the events of the last few years.

I think I would hesitate to put a lot of these politicians in charge of a game of monopoly let alone our very livelyhoods. http://whiteball.co.uk/

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Always tolerant of the EU, but monetary union - paah! Tying the Economy of Germany and the UK to Italy and Greece - FOLLY!

I have always been a strong believer that a N-Euro and a S-Euro would have been a realistic mechanism for a cohesive currency system for Europe, and the UK and Scandis might have gone with that.

Rain, Snow and Hard currency in Northern Europe; Olives, Wine and a softer SEuro in what are now being called the PIGS!!

Oh to live gently with a few vines and an olive grove on the Amalfi Coast!!

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Trissie

Jun 08, 2010 at 11:54

I think that it isnow time to switch from the euro to sterling.

Having seen Cameron on television there is no doubt about it that if he never does anything elsein his life he is going to sort out the economy.

His face reveals all.

The only other possibility is physical gold.

A few Kruger rands may turn out to be a pretty good holding.

Lastly a vote of thanks to all those politicians who over the years have fought tooth and nail to keep us out of the euro and a heap of **** on the heads of all those politicians who tried so hard to take us into the euro.

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