The International Monetary Fund (IMF) this morning urged Eurozone policymakers to restore confidence, reverse capital flight and reintegrate the euro-area to restore confidence in the global financial system.
In its semi-annual global financial stability report, the IMF said it saw increased risks to the system, with the Eurozone crisis the “principal source of concern”.
The euro-area's plodding progress means European banks are likely to offload $2.8 trillion (£1.7 trillion) in assets over two years to cut their risk exposure, an increase of $200bn from a prediction six months ago, the IMF estimated. That could shrink credit supply in the periphery by nine per cent by the end of 2013, crimping economic growth.
"Despite many important steps already taken by policymakers, this agenda remains critically incomplete, exposing the euro-area to a downward spiral of capital flight, breakup fears and economic decline," the IMF said.
The report comes as the IMF is preparing to hold its semi-annual meeting in Tokyo later this week.
City A.M. Reporter