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12/20/12

I.M.F. Says Europe Has Made Progress in Addressing Economic Crisis

The European Union has made progress in addressing its financial crisis, the International Monetary Fund said Thursday, but warned that member states would have to follow through on their commitments to end uncertainty about the future of the euro and of the bloc itself. 

“Significant progress has been made in recent months in laying the groundwork for strengthening the E.U.’s financial sector,” the fund said, summarizing the results of a new study, adding: “the details of the agreed frameworks need to be put in place to avoid delays in reaching consensus on key issues.” 

The sovereign debt crisis, which began in late 2009 with Greece’s acknowledgement that it had been fabricating data on its public finances, has cost Europe billions of euros in lost growth and has devastated labor markets in some countries. Soaring financing costs have led Greece, Ireland and Portugal to seek bailouts. Spain and Italy had appeared to be reaching their own crisis points this year before the European Central Bank calmed the market by promising to do whatever was necessary to defend the euro. 

At the national level, the response has been to cut spending and to raise taxes. At the European level, member states have begun steps toward greater integration, including through a banking union administered by the E.C.B., with common rules for large institutions. The banking plan, though receiving only lukewarm support from Britain and Sweden, appears to be going forward, at least for members of the 17-nation euro zone.

The agreement last week by European leaders on a single supervisory mechanism for banks under the E.C.B. “is a strong achievement,” the I.M.F. said. “It needs to be followed up with a structure that has as few gaps as possible,” especially with regard to harmonizing national rules with the new regulations.

Read more: I.M.F. Says Europe Has Made Progress in Addressing Crisis - NYTimes.com

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