IMF backs Draghi; says Spain, Italy have done enough

Sun Sep 9, 2012 4:57am EDT
 
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By Douglas Busvine and Andrey Ostroukh

VLADIVOSTOK, Russia (Reuters) - The International Monetary Fund on Sunday strongly backed the European Central Bank's plan to staunch the euro zone debt crisis with unlimited bond purchases, saying it was ready to get involved in designing and monitoring its implementation.

IMF Managing Director Christine Lagarde also said large, debt-strapped euro zone countries Spain and Italy had taken enough action to repair their finances to merit aid from the rest of the European currency union.

But, amid pressure on Madrid to request a full European bailout, Lagarde left open the scale of the IMF's possible involvement in ECB head Mario Draghi's plan, which was approved by the central bank's policy making council on Thursday.

Under the Draghi plan, the ECB would stand ready to buy any amounts of sovereign debt with a term of up to three years, thereby ensuring a government's access to funding, in return for a bailout deal with tight strings attached.

"What the central bank has announced last Thursday is a clear indication of the framework in which it would be an active player in restoring the situation in the euro zone," Lagarde told reporters in the Russian port city of Vladivostok after an Asia-Pacific summit.

"Our sense is that now the euro partners know exactly what they have to do. As far as the IMF is concerned, we shall certainly be ready to help and to assist in the design and monitoring of eventual programmes."

Economic headwinds from Europe have slowed growth in the 21 members of the Asia-Pacific Economic Cooperation (APEC), which accounts for over half of world economic output and whose leaders held a two-day summit.

Lagarde backed a new, $158-billion Chinese infrastructure spending offensive, saying it was important that countries running external surpluses make their contribution to supporting global growth.   Continued...

 
Managing Director of the International Monetary Fund (IMF) Christine Lagarde looks up as she speaks at the Global Investment Conference 2012 in London July 26, 2012. REUTERS/Neil Hall