Europe pressed for action to end debt crisis

Sun Apr 22, 2012 2:55pm EDT
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By Gernot Heller and Glenn Somerville

WASHINGTON (Reuters) - Global finance chiefs pressed Europe in weekend talks to quickly put in place the economic reforms needed to finally extinguish its debt crisis now that newly increased financial buffers have bought some precious time.

A day after advanced and emerging countries agreed to double the firepower of the International Monetary Fund to help contain the crisis, the IMF's governing panel said on Saturday that the 17-nation euro area must cut government debt burdens further, push bold economic reforms and stabilize financial systems.

Debt problems will resurface and growth will stumble unless these steps are taken, the head of the IMF's governing panel, Singapore's finance minister, Tharman Shanmugaratnam, warned.

An uneasy calm returned to world financial markets after the Greek crisis subsided but the IMF is concerned that without strong action fresh tensions will erupt, sapping global growth.

The IMF panel said all advanced economies needed plans to rein in deficits, but it singled out the euro zone as crucial to revitalizing strong growth.

The euro area, the world's second-largest economic bloc, already has slipped into a mild recession, weakening its major export partner China and other parts of emerging Asia, while growth in the United States remains sluggish.

Unless stronger growth is restored and investor confidence returns, the IMF and finance chiefs from around the globe said the world will not break out of a vicious debt-driven cycle.

"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," Tharman said at a news conference on Saturday.   Continued...

Finance ministers and central bank governors pose for a family photo before the International Monetary and Financial Committee (IMFC) meeting during the spring IMF-World Bank meetings in Washington April 21, 2012. REUTERS/Yuri Gripas