IMF presses Europe to contain debt crisis
By Gernot Heller and Glenn Somerville
WASHINGTON (Reuters) - Europe was pressed by other world powers on Saturday to take strong measures to fix its debt-heavy economy and restore growth to a level that would lift the cloud hanging over the fragile global recovery.
A day after top economies agreed to lend more money to the International Monetary Fund to help contain Europe's debt crisis, the IMF's governing panel said the euro area must cut government debt burdens, make bold economic reforms and stabilize its financial systems to restore growth.
Debt problems will resurface unless these steps are taken, the head of the IMF's governing panel, Singapore Finance Minister Tharman Shanmugaratnam, warned.
"What was really critical in all our minds was to get back to normal growth over the medium term and preferably sooner rather than later, in other words within two to three years," he told a news conference.
"If we don't get back to normal growth, if we don't get GDP back to its potential levels, than fiscal sustainability is not possible either," he warned.
In its policy statement the IMF panel warned against overly harsh budget cuts that could have negative consequences.
"In advanced economies further actions are needed in many countries to achieve credible fiscal consolidation and government debt reduction, while avoiding excessively contractionary fiscal policies," it said.
The United States also piled on pressure. Continued...