IMF calls for direct aid to struggling euro zone banks
22 Jun 2012
The International Monetary Fund (IMF) has called on the European Union to aid struggling euro zone banks directly rather than through governments and urged the European Central Bank (ECB) to cut interest rates, saying the future of the euro was at stake.
The stark message from IMF managing director Christine Lagarde, delivered to euro zone finance ministers who met in Luxembourg, would add to pressure to work out a unified approach to address problems at struggling banks such as those in Spain.
"We are clearly seeing additional tension and acute stress applying to both banks and sovereigns in the euro area," Lagarde told a news conference after the meeting.
"A determined and forceful move towards complete European monetary union should be reaffirmed in order to restore faith," she said. "At the moment, the viability of the European monetary system is questioned."
The IMF chief spelt out a plan that envisioned the issuance of jointly guaranteed euro zone debt as also a more centralised economic control in the 17 countries that used the euro.
As ministers prepared to provide up to €100 billion by way of aid for Spain to shore up its stricken banks, Lagarde said financial support for banks needed to be extended directly, rather than via the state. (See: EU agrees to lend Spain up to €100 billion)
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