Tags: IMF | Clarity | Greece | Italy

IMF Chief Calls for 'Political Clarity' in Greece, Italy

Thursday, 10 Nov 2011 07:07 AM

The head of the International Monetary Fund called Thursday for greater "political clarity" in Greece and Italy, after talks with Chinese leaders dominated by Europe's worsening debt crisis.

Greece and Italy are grappling with domestic political upheaval brought on by the sovereign debt crisis that has engulfed the eurozone, and Christine Lagarde said both countries urgently needed to sort out their leadership difficulties.

"Political clarity is conducive to more stability ... it is much needed in Greece, it is much needed in Italy," the IMF chief told journalists in Beijing.

Confusion over the future leadership of both countries was "conducive to volatility," added Lagarde, who is on a two-day visit to China.

Her comments came after talks on who would succeed Greece's outgoing prime minister George Papandreou broke down in acrimony as efforts to form an emergency government faltered.

Italy's Prime Minister Silvio Berlusconi has said he will step down once credible economic reforms are in place, after which talks on a new government will start.

Lagarde also said emerging economies had a role to play in resolving the debt woes threatening the global economy, calling on them to allow their currencies to appreciate.

"Emerging markets, and large emerging markets in particular, have a role to play either by reengineering their growth model or by letting their currencies appreciate appropriately," she said.

Asian stock markets slumped on Thursday after Wall Street suffered a pummeling, as Italy became the latest European country to suffer a huge surge in borrowing costs.

The IMF chief will hold talks later Thursday with China's Premier Wen Jiabao against a backdrop of worsening economic turmoil in Europe that has rattled financial markets around the world.

Earlier she met with Vice Premier Wang Qishan, China's top finance official, and central bank governor Zhou Xiaochuan, weeks after the chief of the European bailout fund travelled to Beijing to try to persuade leaders to contribute.

Lagarde would not comment on the specifics of her discussions with the leaders, saying: "If I was to discuss the terms of any particular loan I would not discuss it here."

The IMF chief's visit to China comes amid mounting concerns over the debt crisis facing the eurozone.

On Wednesday, Lagarde warned that Asian economies were not immune to the crisis, saying the world risked a "downward spiral" if it did not pull together to tackle the problem.

China has the world's largest foreign exchange reserves at $3.2 trillion, but has so far made no firm commitment to provide financial assistance for the eurozone.

Europe has been discussing establishing a special purpose investment vehicle to persuade China and other potential contributors to sign up, and is exploring the possibility of linking it to the IMF.

Lagarde visited Moscow before heading to China, and on Wednesday the Russian government said it was not prepared to invest directly in the EU rescue fund and would prefer to help the eurozone through the IMF.

But emerging economies -- or "crisis bystanders" -- that have expressed a willingness to boost their investment in the IMF want the funds to be made available to all members, not just eurozone countries, she said.

Any move to help developed European countries out of the crisis would be a hard sell for the leaders of China, where millions of people still live in poverty, and inflation and housing costs are straining household budgets.

China has also been burned before on risky overseas investment. It bought stakes in investment bank Morgan Stanley and asset management firm Blackstone only to see their values collapse in the 2008 global financial crisis.

© AFP 2017

 
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The head of the International Monetary Fund called Thursday for greater political clarity in Greece and Italy, after talks with Chinese leaders dominated by Europe's worsening debt crisis. Greece and Italy are grappling with domestic political upheaval brought on by the...
IMF,Clarity,Greece,Italy
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2011-07-10
Thursday, 10 Nov 2011 07:07 AM
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