Monday

23rd Oct 2017

IMF tells EU: Stop 'unproductive debate' and integrate 'now'

The International Monetary Fund has bluntly warned the European Union it must put an end to its "unproductive debate" over debt restructuring and, in an unprecedented outside intervention in the construction of the European Union, told the bloc it must integrate faster and more deeply in order to stop a global disaster.

Using much of the same censorious language about the EU that the EU has used about Greece, the international lender told the bloc to act "now" and that its handling of the situation "needs attention".

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

While "courageous attempts" have been made by the eurozone to address the crisis, "failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers," read a report of the Fund's review mission investigating the effectiveness of eurozone policies, published on Monday (20 June).

Saying Europe is at a "crossroads", the IMF's acting director, John Lipsky, in Luxembourg for a meeting with EU finance ministers, declared: "The euro area needs to strengthen economic governance and may need to be more intrusive in terms of national structures."

Warning that all the euro area's efforts so far, including the so-called six-pack delivering economic governance, the EU semester system and the Euro Plus Pact while welcome, are not enough to prevent "global spillovers" from the crisis, the IMF said that still "more economic and financial integration" and EU intervention in national economies is necessary.

The Fund's European director, Antonio Borges, even went so far as to compare the unification process unfavourably to that which happened in the United States over a century ago.

"We really believe that many of the current problems result from incomplete integration," he told reporters upon presentation of the report.

"In the process of developing monetary union like the United States, which is a fully integrated monetary union, you have obstacles that magnify the problem," he said.

Specifically, the report mentioned that "without political union" and fiscal transfers, "stronger governance of the euro area is indispensable."

The report also demanded deeper integration of labour markets, the flow of goods and services markets and, crucially, capital.

The IMF's review of eurozone policies, parallel to the review the EU-IMF-ECB troika mounts of bail-out countries and the recommendations the European Commission has recently issued regarding EU member state economic policies, is part of the Fund's new "toolkit" developed in the wake of the global financial crisis.

The process sees IMF missions speak to authorities from each of the world's five leading economic areas and asks them the impact of the policies of other leading economies on their own. The result of these consultations is then compiled in a mission report.

The IMF's EU report also said the ECB should proceed "gradually" and "cautiously" in hiking interest rates so as to "limit stress" to the eurozone periphery.

The report went on to say that the EU needs to announce what it will do to resolve problems in the banking sector before stress test results are announced, adding that preference should be given to market-based solutions, but that "public support may be necessary ... in a manner co-ordinated across the EU."

The IMF called for progress towards common depositor insurance, banking management and crisis prevention, with a European Resolution Authority the "ultimate goal" backed by a deposit guarantee and resolution fund to deliver a "euro area centred backstop for both liquidity and solvency support."

In its sharpest language, the document said: "It will be essential to bring the unproductive debate about debt reprofiling or restructuring to closure quickly."

"Policies to stop contagion from sovereign debt adjustment or re-profiling are at a premium."

Macron puts trade policy on summit table

France's president wants a "political discussion" on EU trade policies at Thursday's summit, amid domestic concerns over Canada and South America deals. But his colleagues are likely to avoid a lengthy debate.

Analysis

Juncker's euro-push could risk unity, warns eastern flank

The EU Commission chief hopes that as Emmanuel Macron pushes for euro area countries to integrate further creating a multi-speed Europe, central European members will be more inclined to join the single currency. Are they?

Stakeholders' Highlights

  1. Martens CentreI Say Europe, You Say...? Interview With Commission VP Jyrki Katainen
  2. Mission of China to the EUPresident Xi Jinping Proposes Stronger Global Security Governance at Interpol Assembly
  3. European Friends of ArmeniaEU Engagement Could Contribute to Lasting Peace in Nagorno-Karabakh
  4. UNICEFViolence in Myanmar Driving 12,000 Rohingya Refugee Children Into Bangladesh Every Week
  5. European Jewish CongressBulgaria Applauded for Adopting the Working Definition of Antisemitism
  6. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  7. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  8. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  9. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  10. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  11. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  12. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe