IMF chief says Europe debt crisis still serious

NEW DELHI: The chief of the International Monetary Fund (IMF) said on Thursday the debt crisis in Europe remained serious but he tipped Ireland to recover rapidly after its weekend bailout.

On Sunday, the European Union and the IMF announced an 85-billion-euro ($111-billion) rescue package for Ireland to shore up its banking sector and enable the country to meet its debt obligations.

“The crisis in Europe is still strong” with Ireland and Greece “at the edge of a cliff” and some other nations are “not far from the edge of the cliff,” IMF managing director Dominique Strauss-Kahn told reporters in New Delhi.

But the Irish rescue “should fix the problems” and the country’s economy “will come back on track rather rapidly,” he said, adding the IMF stood poised to assist other nations if needed,

His comments came as the European Central Bank announced it would keep buying government bonds, a key part of its stimulus measures to support indebted eurozone nations, and fight the debt crisis.

Ireland’s bailout has calmed fears about its economy but intensified worries the debt crisis could engulf financial stragglers Portugal and Spain. Greece, which has chronic finance problems, received a 110-billion-euro bailout in May.

Strauss-Kahn contrasted Asia’s economic vitality with a sluggish recovery in Europe and the United States.
“In parts of world, in Asia, South America and parts of Africa, growth is going well,” Strauss-Kahn added, paying tribute to India which he said has “become an economic superpower.”

But he said India, along with other fast-growing Asian nations, now needed to play a bigger role in the global financial system, saying “with economic strength comes responsibility.”
“It is impossible to be a free rider,” he said.

He cautioned that Asian nations including India, which posted nearly nine percent economic growth in the last financial quarter, could face overheating problems as they bounce back from the global crisis.

But he said Indian authorities were managing the country’s inflation and other problems well.
Globally, Strauss-Kahn said, recovery was “moving along, but is still emerging and fragile.”

The former French finance minister said he was happy about opinion polls in France indicating his popularity among the French public, but dodged questions about whether he would be a candidate in the presidential polls slated for 2012.

“I am happy that my fellow citizens like me,” said Strauss-Kahn, whose visit came two days before an official trip to India by French President Nicolas Sarkozy, whose popularity ratings are plumbing all-time lows.

“But I have some political experience and I know polls shouldn’t be taken too seriously.”

Strauss-Kahn, whose IMF term ends in 2012, added it was urgent that nations continued their economic cooperation as the world pulls out of the global slump.

“Growth policies must be as supportive as possible in advanced economies” that are facing difficulties, he added, defending a recent move by the United States to pump 600 billion dollars into its economy.

“If growth stalls in the US, the consequences for the rest of the world would be huge,” he said.
The IMF does not think there is a high chance of a double-dip recession, he said, but added the “downside risk is too great to accept.”

Developed “countries must avoid any risk of going back to negative growth” while adopting strong medium-term policies to roll back stimulus packages and reduce debt, he said. –AFP