IMF says euro crisis could spread to core

 
City A.M. Reporter
DESPITE bailouts for Greece, Ireland and Portugal, Europe’s debt crisis may yet spread to core Eurozone countries and emerging eastern Europe, the International Monetary Fund (IMF) said yesterday.

The warning came as government sources in Athens said international inspectors checking on Greece’s compliance with its EU/IMF rescue package had found problems and were pressing for deeper spending cuts to cover a likely revenue shortfall.

The IMF said it stood ready to provide more aid to Greece if requested, though the country that triggered Europe’s sovereign debt crisis in 2009 still had plenty of untapped potential to raise extra cash itself though privatisations.

“Contagion to the core euro area, and then onwards to emerging Europe, remains a tangible downside risk,” the global lender’s latest economic report on Europe said.

Finance ministers of the 17-nation single currency area are set to approve a €78bn (£68bn) rescue plan for Portugal next Monday after Finland’s Prime Minister-in-waiting clinched a deal to ensure parliamentary approval of the package.

The semi-annual IMF report said peripheral members of the Eurozone needed to make “unrelenting” reform efforts to overcome the debt crisis and prevent it spreading further.

Meanwhile, in Ireland, public expenditure minister Brendan Howlin said yesterday the country wants to reschedule debt issued under its rescue package and will not accept less favourable treatment than other bailed out countries.

“Long-term rescheduling of debt is something that would be desirable,” said Howling in an interview.

Under the terms of its EU/IMF agreement, Ireland plans to return to debt markets at the end of next year.