IMF warns debt crisis could still spread
The International Monetary Fund (IMF) has today warned that the euro zone debt crisis could still spread, despite bailouts for Greece, Ireland and Portugal.
A report by the IMF said: “Contagion to the core euro area, and then onwards to emerging Europe, remains a tangible downside risk.”
There are already further fears for Greece after a recent meeting of euro zone finance ministers suggested that the crisis-torn economy may need further financial help in order to avert a debt restructure.
The IMF’s European department director, Antonio Borges, was asked if Greece was likely to receive a new financial aid package to help it through its fiscal recovery programme, and he said it was open to the possibility.
Meanwhile, the Fund is urging the European Central Bank (ECB) to refrain from lifting interest rates further.
Last month, the ECB raised interest rates from 1% to 1.25% – the first time in almost three years in a bid to fight inflation. However, the IMF has said euro zone monetary policy could “afford to remain relatively accommodative”.
Finally, the Fund is predicting economic growth of 1.7% this year for the euro zone – provided debt crisis do not damage the 17-member nation.