Euro zone agreement only partial solution: IMF

Sun Dec 11, 2011 5:09pm EST
 
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By Tova Cohen and Ari Rabinovitch

TEL AVIV (Reuters) - An agreement reached by European countries for deeper economic integration was a step in the right direction but not a complete solution for the euro zone's debt crisis, International Monetary Fund (IMF) chief economist Olivier Blanchard said on Sunday.

"I'm actually more optimistic than I was a month ago, I think there has been progress," Blanchard told the Globes business conference in Tel Aviv.

"What happened last week is important: it's part of the solution, but it's not the solution."

He did not say what further steps were needed.

European leaders agreed in Brussels on Friday to draft a new treaty for deeper euro zone economic integration, although Britain, the region's third-largest economy, refused to join the 17 euro states and nine other EU countries in the fiscal union.

Asked whether diverse statements from policymakers in Europe were causing volatility in markets, Blanchard said: "A lot of the volatility is coming from statements from Europe, showing the range of opinions and inability to get to a logical decision process."

EU leaders also agreed euro zone states and others should provide up to 200 billion euros ($270 billion) in bilateral loans to the IMF to help tackle the crisis, with 150 billion euros coming from countries in the euro currency.

"The commitment to give us 200 billion euros makes a major difference in the sense that we can now go out and talk to other countries and say, 'the Europeans have given us money, can you help?," Blanchard said.   Continued...