Euro zone agreement only partial solution -IMF

TEL AVIV Sun Dec 11, 2011 10:18pm IST

International Monetary Fund (IMF)'s Economic Counsellor Olivier Blanchard presents the World Economic Outlook at the IMF Headquarters in Washington September 20, 2011. REUTERS/Stephen Jaffe/IMF/Handout/Files

International Monetary Fund (IMF)'s Economic Counsellor Olivier Blanchard presents the World Economic Outlook at the IMF Headquarters in Washington September 20, 2011.

Credit: Reuters/Stephen Jaffe/IMF/Handout/Files

Related Topics

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 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 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.

"Whether this gives us the whole bazooka or not, I hope so."

Asked by Reuters on the sidelines of the conference whether Britain's decision to isolate itself was right for its economy, he said: "I think that's an issue for the Europeans to decide."

Adding a tone of scepticism regarding the treaty's chances of success, Jim O'Neill, chairman of Goldman Sachs Asset Management, said the most important thing that happened this week is not "this bungled European deal", but the release of data that showed a slowing trend of growth in China, the world's number two economy.

"The problem in Europe, this isn't really a debt crisis, it's a crisis about the structure of leadership ... Europe needs to organise itself properly and show proper leadership," he said.

"Everything around the world is being driven by some idiotic statement from some policymaker in the EU."

But he added that now might be the best time in 20 years to invest in Europe, saying, "Never let a good crisis go to waste."

O'Neill and Blanchard had diverging forecasts for growth in the United States next year.

"I think 2012, in the end, will not be as good as 2011," IMF's Blanchard said. "Part of it is that 2011 came out a bit better than expected. I'm not sure this will be repeated."

O'Neill disagreed, saying he was optimistic on the U.S. economy and thinks growth will exceed 3 percent this quarter.

"I think that corporate America is in an exceptionally competitive position," he said.

(Reporting by Tova Cohen and Ari Rabinovitch; Editing by David Hulmes)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Record Highs

Record Highs

BSE Sensex, Nifty hit record highs, insurers gain  Full Article 

Global Growth

Global Growth

IMF cuts outlook, warns of stagnation risk in rich nations  Full Article 

Monsoon Revives

Monsoon Revives

Monsoon revival keeps rain above average   Full Article 

Wipro Results

Wipro Results

Firm sees strong sales growth, eyes Europe deals   Full Article 

Scourge of Inflation

Scourge of Inflation

Markets' post-election enthusiasm lost on consumers  Full Article 

Just Not Enough

Just Not Enough

Amazon's smartphone fails to kindle a "Fire" among reviewers.  Full Article 

Rising Market Value

Rising Market Value

Facebook goes express to mega-cap status  Full Article 

Mining Roadblock

Mining Roadblock

Coal India's plans for 20 mines hit by land, environment delays  Full Article 

Power Jolt

Power Jolt

UAE's TAQA pulls out of India power plant deal with Jaiprakash  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage