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IMF urges European nations to act together against debt

09-21-2011 13:06 BJT

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IMF chief economist Olivier Blanchard says the euro zone debt worries are weighing on banks and adding volatility to the financial markets. He warns that talk of the euro zone splintering is "crazy" and European leaders need to quieten their dissonant voices and make concerted efforts to solve the debt crisis. Michael Wang has more.

The IMF is issuing a warning to European leaders - saying the euro zone is dragging its feet when it comes to stopping the debt crisis.

The organization is urging Europe nations to act together and deal with the worsening sovereign debt problems. Otherwise, they could dip back into recession.

IMF chief economist Olivier Blanchard says the euro zone debt worries are weighing on
banks and adding volatility to the financial markets.

Blanchard said, "I think we are very explicit in our messages, both in the EU and elsewhere, in saying that Europe must get its act together. That they met in July and took a number of decisions, as to, for example the role of the EFSF (European Financial Stability Facility) and it is absolutely essential that they do what's needed so that this is operational very soon."

The top economist at the global lender singles out Europe as "a major source of worry" when discussing the global economic outlook.

Those worries have greatly impacted banks which hold sovereign bonds.

Investors are questioning Europe's ability to come up with a convincing solution to its festering sovereign debt crisis, which has rattled confidence and affected financial markets.

Blanchard said, "Worries about sovereigns have translated into worries about the banks holding these sovereign bonds, mainly in Europe. These worries have led to a partial freeze of financial relations with banks keeping high levels of liquidity and tightening lending."

The IMF concerns about Europe follow a downgrade of Italian debt by ratings agency Standard and Poor's on Monday. The downgrade adds additional stress by raising borrowing costs for weaker members of the Euro zone.

Editor:Li Wanran |Source: CNTV.CN

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