21 JUN 2011
By Leigh Phillips (IMF tells EU: Stop 'unproductive debate' and integrate 'now'
EUOBSERVER / LUXEMBOURG - The International Monetary Fund has bluntly warned the European Union it must put an end to its "unproductive debate" over debt restructuring and, in an unprecedented outside intervention in the construction of the European Union, told the bloc it must integrate faster and more deeply in order to stop a global disaster.
Using much of the same censorious language about the EU that the EU has used about Greece, the international lender told the bloc to act "now" and that its handling of the situation "needs attention".
While "courageous attempts" have been made by the eurozone to address the crisis, "failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers," read a report of the Fund's review mission investigating the effectiveness of eurozone policies, published on Monday (20 June).
Saying Europe is at a "crossroads", the IMF's acting director, John Lipsky, in Luxembourg for a meeting with EU finance ministers, declared: "The euro area needs to strengthen economic governance and may need to be more intrusive in terms of national structures."
Warning that all the euro area's efforts so far, including the so-called six-pack delivering economic governance, the EU semester system and the Euro Plus Pact while welcome, are not enough to prevent "global spillovers" from the crisis, the IMF said that still "more economic and financial integration" and EU intervention in national economies is necessary.
The Fund's European director, Antonio Borges, even went so far as to compare the unification process unfavourably to that which happened in the United States over a century ago.
"We really believe that many of the current problems result from incomplete integration," he told reporters upon presentation of the report.
"In the process of developing monetary union like the United States, which is a fully integrated monetary union, you have obstacles that magnify the problem," he said.
Specifically, the report mentioned that "without political union" and fiscal transfers, "stronger governance of the euro area is indispensable."
The report also demanded deeper integration of labour markets, the flow of goods and services markets and, crucially, capital.
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