IMF calls for 'comprehensive' euro solution

| Friday December 10, 2010 00:00

Speaking a day after meeting behind closed doors with European Union finance ministers in Brussels, Dominique Strauss-Kahn said he did not believe the euro was at risk. But he said there must be a more 'comprehensive, integrated' plan to shore up the region's finances and calm investor fears.

'The eurozone has to provide a comprehensive solution to this problem,' Strauss-Kahn said in Athens on Tuesday, where he met with Greek leaders to review their economic restructuring efforts, adopted earlier this year as part of a 110bn EU-IMF bail-out. 'The piecemeal approach, one country after another, is not a good one.'Strass-Kahn's comments came at the same time a two-day gathering of EU finance ministers in Brussels ended without signs of consensus on the next steps for a Europe-wide response to the crisis.

Apart from the bail-outs of Greece and Ireland, the EU has relied on massive bond purchases by the European Central Bank to bring down borrowing costs for the two economies now most at risk, Portugal and Spain. But officials had hoped the Brussels meetings would bring momentum to some of the Europe-wide measures proposed by finance ministers in recent days.

Instead, officials left Brussels divided over the two most high-profile proposals, increasing the size of the 440bn eurzone rescue fund or a joint Italy-Luxembourg plan to create a European bond that would enable struggling countries to borrow at lower rates.

Wolfgang Schuble, the German finance minister, reiterated his country's opposition to the Eurobond plan, saying that by distributing interest-rate risk to all the eurozone's countries, it would run afoul of EU budgeting rules.

But Giulio Tremonti, the Italian finance minister and one of the co-authors of the plan, said he remained optimistic. 'It is a proposal for a joint EU action against the crisis,' he said.

The Irish government also presented its long-awatied austerity budget plan to parliament Tuesday, which aims to cut 6bn in spending next year and 15bn over the following four years.

While it introduced several new tax measures, it retained Ireland's low corporate rates, which came under fire from France and Germany during the bail-out negotiations.-(FT.COM).