IMF intervention pledge lifts eurozone confidence
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Your support makes all the difference.The International Monetary Fundsignalled its readiness to extend its support to ailing eurozone economies yesterday, saying it could buy Spanish or Italian debt alongside the currency union's beefed-up bailout fund to restore confidence among investors.
Antonio Borges, the European head of the Washington-based organisation, also urged European countries to shore up their banks to the tune of €100bn to €200bn in order to boost investor confidence.
Against the backdrop of problems at the Franco-Belgian lender Dexia, Mr Borges said action was needed to bolster banks across the continent, not just in France, where lenders have sparked concern as investors attempt to gauge their exposures debt-laden countries such as Greece, in focus again yesterday as workers staged a general strike in protest against austerity cuts forced upon the country.
The managing director of the IMF Christine Lagarde has called for similar action in the past.
"There has been a lot of talk about French banks but... the problem is very widespread. No banking sector in the world can sustain a generalised loss of confidence and we need to restore that confidence all over Europe," Mr Borges argued, adding that the sums involved were manageable. He also said that the European authorities were working on plans to "bring more official, public capital into the banking sector precisely to restore confidence".
"We are talking about figures of between €100bn and €200bn, which in our view is very, very small compared to the size of the European capital markets and compared to... the new, enhanced EFSF," Mr Borges said, referring the to the revamped European Financial Stability Facility, which, once it has been approved by national parliaments across the seventeen country bloc, will have powers to lend money to Governments for the purpose of shoring up lenders.
The German Chancellor Angela Merkel, a key political player in the eurozone debt crisis, also indicated her openness to the idea.
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