The Chosunilbo (Korea) May 13, 2011
The International Monetary Fund is warning that the governmental debt problems in Greece, Ireland and Portugal could spread to other European countries that employ the euro currency and also to the emerging economies in eastern Europe.
In its semi-annual report on the European economy, the IMF said Thursday that officials so far have been able to contain the continent’s debt contagion to the three countries on Europe’s geographic periphery. But the Washington-based financing agency said there “remains a tangible downside risk” of debt problems spreading. It said European nations will have to make “unrelenting” efforts to contain their financial problems.
The IMF said weak banking systems remain a threat to the financial health of the 17 nations where the euro is the common currency. It said the reduction in the number of banks in Europe is proceeding too slowly and that greater financial integration on the continent is needed.
Greece and Ireland reluctantly accepted bailouts from the IMF and their European neighbors last year and now Portugal is poised to take a US$112 billion bailout. Even with the 2010 bailout, Greece is struggling with a shrinking economy and declining tax revenues. It is looking to restructure its $158 billion bailout from last year and is seeking new financing of $85 billion or more.
IMF and EU financial analysts are in Athens looking at the government’s financial records to determine whether more outside assistance is needed. Government sources told the Reuters news agency that the analysts already have found problems and are concerned that the government will not be able to meet its revenue targets. The analysts are pressing for more spending cuts.
The Greek government has imposed significant and highly unpopular austerity measures that have sparked frequent street protests. The IMF’s European director, Antonio Borges, says Greece could raise more than $71 billion, and perhaps much more, by selling state assets to private interests.