IMF: If Europe does not take action, we are approaching a second Great Depression

“The world is facing a repeat of the Great Depression, if Europe does not take more stringent measures. Eurozone countries need "more substantial protection" to cope with the crisis and the issuing of “EU joint bonds", in order to convince markets in the viability of the single currency,” said Executive Director of the International Monetary Fund Christine Lagarde to the German Council on Foreign Relations in Berlin yesterday. Her warning was even darker than the notice of the World Bank that we are facing the risk of a new economic downturn like the one from 2008-2009 after the collapse of US Lehman Brothers investment bank.

According to Lagarde, the crisis is likely to engulf the whole world. Therefore, the IMF must have up to $500 bn in additional funds at its disposal in order to assist countries affected by the crisis. "We need greater protection. Without it, countries like Italy and Spain, which are generally able to pay their debts, might be pushed to a solvency crisis because of the excessive cost of financing," said Lagarde.

"The substantial increase in the real resources available during the move from the European Financial Stability Mechanism (EFSM) to the European Stability Mechanism (ESM) will be of great help to the Eurozone countries,” said Lagarde. According to her, the amount that would ensure sufficiently reliable protection against the debt crisis is €1 trln.

Another solution is for the European Central Bank to cut interest rates, thus providing the necessary liquidity support for stabilising bank financing and sovereign debt markets.

Прочети цялата новина

Свързани новини: