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IMF: Risk To Core Economies Frets EU Partners

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[The International Monetary Fund's acting head John Lipsky said on Tuesday the euro zone's partners were concerned about the potential for the crisis in the zone's peripheral economies to spread to core countries. Lipsky said in a speech in Berlin that "common sense tells you the direct impact of the peripheral economies is very small as they are small economies, but there is concern about the potential spillovers into the core economies." He said the IMF stood ready to help the troubled euro zone countries which carry out the necessary reforms. Greece is under a tight deadline to approve a new package of unpopular reforms to qualify for aid and avoid plunging into bankruptcy. Progress on these reforms will decide whether the European Union release a new tranche of their existing 110-billion-euro Greek bailout in July and a fresh package of 120 billion euros designed to keep Greece afloat through 2012 and beyond. "As long as these countries are willing to make these efforts, we along with our European partners will make sure their financing needs are met," Lipsky said at the American Academy in Berlin. He singled out the countries in the European Union's single currency zone which have already received bailouts -- Greece, Ireland and Portugal -- as countries whose debt and deficit problems were fundamentally caused by lost competitiveness. "If these countries can't restore competitiveness, they won't prosper," he said. "No one is expecting miracles or that the solutions will be instantaneous," he said. "In each of these cases the programmes have provided adequate financing so the countries have not been required to access private markets for some time to come." Focusing on Greece, whose parliament is due to vote Tuesday night on Prime Minister George Papandreou's reform proposals which are a strict condition for fresh assistance from the IMF and the euro zone, he said the solutions required political will. "The underlying Greek fiscal system is broken, but if it's broken, that implies it can be fixed. It's not that hard to figure out how to fix it. ... It's a matter of political will," he said, adding that the reforms needed to be implemented fully in order to succeed. Asked what would happen if the Greek parliament did not give its backing to the reforms, Lipsky said this would mean that "the bedrock of the programme does not exist." He was, however, optimistic that there would be "real progress" in talks on how to involve Greece's private creditors in the fresh bailout programme, a requirement that Germany, the euro zone's economic powerhouse, has insisted upon. "After this weekend's meeting I am very hopeful and expect to see real progress," he said, referring to a meeting of euro zone finance ministers in Luxembourg on Sunday. (Reuters)