Jefferson City, MO 79° View Live Radar Mon H 83° L 69° Tue H 90° L 73° Wed H 93° L 75° Weather Sponsored By:

IMF head warns of 'acute stress' in Europe

IMF head warns of 'acute stress' in Europe

June 22nd, 2012 by DON MELVIN, Associated Press in News

LUXEMBOURG (AP) - The head of the International Monetary Fund said Thursday the euro is under "acute stress" and urged leaders to consider measures including jointly issuing debt to alleviate the pressure on the region's debt-stricken members.

Christine Lagarde said at a meeting of finance ministers of the 17 countries that use the euro in Luxembourg late Thursday that "We are clearly seeing additional tension and acute stress applying to both banks and sovereigns in the euro area."

To break up what she called break "the negative feedback loop" that occurs when governments take on more debt to bail out their banks, the IMF head called on Europe's two emergency bailout funds to shore up shaky banks directly. She also urged the European Central Bank to adopt a more relaxed monetary policy.

The IMF chief also recommended that eurozone leaders should consider issuing bonds or debt "in some form" backed by governments of all member countries- an idea Germany has vehemently opposed.

Lagarde's IMF, the European Union and the ECB - the so called "troika" overseeing Greece's bailout - will also send representatives to Greece Monday to review the country's progress in reforming its budget, she said.

Earlier Thursday, Spain announced the conclusions of two independent auditors' reports into Spain's stricken banking industry. The auditors found that the country's lenders would need up to (euro) 62 billion ($78.6 billion) in new capital to protect themselves from economic shocks. The Spanish government will use these reports as the basis for its formal request for a bank bailout loan.

Jean-Claude Juncker, the head of the eurogroup, said that Spain would make a formal request for financial assistance by next Monday. Finance ministers from the 17 eurozone members have offered to lend up to (euro) 100 billion ($127 billion) to Spain to help bail out its banks.

Eurogroup finance ministers met Thursday evening in Luxembourg to try to find ways to stabilize the euro currency, which is threatening to crack under pressure of national debts and high borrowing costs.

The leaders of the 17 countries that use the euro have been under global pressure to find a comprehensive solution to the debt crisis rather than continuing to take piecemeal measures that provide only temporary relief. At this week's G-20 summit of world economic powers in Los Cabos, Mexico, politicians including U.S. President Barack Obama called on Europe to do what was necessary.