IMF: Action must be taken to prevent debt crisis
The International Monetary Fund (IMF) has warned euro zone policymakers to take immediate action to prevent the debt crisis spreading outside Europe.
The warning comes as Spain’s borrowing costs rose to a 9-year high today as fears continue to grow over the debt crisis in the euro zone.
There are fears that Spain, which is the euro zone’s fifth largest economy, could be forced to seek a bailout, like Greece, Ireland and Portugal.
Borrowing costs rose in Greece and Ireland – just before they were forced to seek emergency aid.
A summit will take place later this week in Brussels where euro zone leaders will, again, try to prevent the debt crisis from spreading and discuss a second bailout for debt-laden Greece.
Luc Everaert, of the IMF’s European Department, comments: “The crisis in the periphery is not fully addressed yet… Directors think this should be done very urgently.”
Directors of the IMF warned that the risks of the euro zone debt crisis threaten the recovery of not just Europe, but the world.
Meanwhile, the Washington-based Fund has downgraded its growth forecast for the 17-member euro zone to 1.7% in 2012, down from its May forecast of 1.9%.