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IMF warns of vulnerabilities
Source: Agencies |
September 22, 2011, Thursday
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Print Edition
Print Edition
THE International Monetary Fund says the global financial system is more vulnerable than at any point since the 2008 financial crisis.
Risks to banks and financial markets have increased in recent months, the global lending organization said in a report yesterday. The European debt crisis is affecting its banking system to the point where banks may pull back on lending to conserve cash, which threatens to worsen growth in the region.
Meanwhile, there are growing doubts that United States lawmakers can forge the political consensus needed to reduce its growing budget deficits. Rising deficits were a key reason Standard & Poor's downgraded long-term US debt last month.
European leaders should quickly implement a deal reached in July that provides the region's bailout fund with more flexibility, while the US and Japan must phase in steps to reduce their deficits, the IMF said.
"Risks are elevated, and time is running out to tackle vulnerabilities that threaten the global financial system and the ongoing economic recovery," the IMF pointed out in its semi-annual Global Financial Stability report.
The report is the second warning from the IMF in as many days. On Tuesday, the IMF sharply cut its growth forecasts for the global economy, the US and Europe for 2011 and 2012.
The 187-member group is holding its annual meeting at the end of this week in Washington. The meeting brings together finance ministers and central bankers from around the world.
The IMF has been stepping up its pressure on Europe to resolve its financial problems, which the body sees as major threats to the global economy. Political squabbling between European leaders has interfered with the region's ability to reach a sustainable solution, the report said.
Olivier Blanchard, the IMF's chief economist, said on Tuesday that "Europe must get its act together." He criticized its leaders for being "one step behind the action."
The IMF offered US$41 billion to a US$150 billion rescue package for Greece assembled by European leaders in May 2010. The IMF and European Central Bank are reviewing Greece's progress in cutting its government budget deficit.
Risks to banks and financial markets have increased in recent months, the global lending organization said in a report yesterday. The European debt crisis is affecting its banking system to the point where banks may pull back on lending to conserve cash, which threatens to worsen growth in the region.
Meanwhile, there are growing doubts that United States lawmakers can forge the political consensus needed to reduce its growing budget deficits. Rising deficits were a key reason Standard & Poor's downgraded long-term US debt last month.
European leaders should quickly implement a deal reached in July that provides the region's bailout fund with more flexibility, while the US and Japan must phase in steps to reduce their deficits, the IMF said.
"Risks are elevated, and time is running out to tackle vulnerabilities that threaten the global financial system and the ongoing economic recovery," the IMF pointed out in its semi-annual Global Financial Stability report.
The report is the second warning from the IMF in as many days. On Tuesday, the IMF sharply cut its growth forecasts for the global economy, the US and Europe for 2011 and 2012.
The 187-member group is holding its annual meeting at the end of this week in Washington. The meeting brings together finance ministers and central bankers from around the world.
The IMF has been stepping up its pressure on Europe to resolve its financial problems, which the body sees as major threats to the global economy. Political squabbling between European leaders has interfered with the region's ability to reach a sustainable solution, the report said.
Olivier Blanchard, the IMF's chief economist, said on Tuesday that "Europe must get its act together." He criticized its leaders for being "one step behind the action."
The IMF offered US$41 billion to a US$150 billion rescue package for Greece assembled by European leaders in May 2010. The IMF and European Central Bank are reviewing Greece's progress in cutting its government budget deficit.
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