LUXEMBOURG (AP) - The head of the International Monetary Fund
said Thursday the euro is under "acute stress" and urged leaders
to consider measures including jointly issuing debt to alleviate
the pressure on the region's debt-stricken members.
Christine Lagarde said at a meeting of finance ministers of the
17 countries that use the euro in Luxembourg late Thursday that
"We are clearly seeing additional tension and acute stress
applying to both banks and sovereigns in the euro area."
To break up what she called break "the negative feedback loop"
that occurs when governments take on more debt to bail out their
banks, the IMF head called on Europe's two emergency bailout funds
to shore up shaky banks directly. She also urged the European
Central Bank to adopt a more relaxed monetary policy.
The IMF chief also recommended that eurozone leaders should
consider issuing bonds or debt "in some form" backed by
governments of all member countries- an idea Germany has vehemently opposed.
Lagarde's IMF, the European Union and the ECB - the so called
"troika" overseeing Greece's bailout - will also send
representatives to Greece Monday to review the country's progress
in reforming its budget, she said.
Earlier Thursday, Spain announced the conclusions of two
independent auditors' reports into Spain's stricken banking
industry. The auditors found that the country's lenders would need
up to euro62 billion ($78.6 billion) in new capital to protect
themselves from economic shocks. The Spanish government will use
these reports as the basis for its formal request for a bank
Jean-Claude Juncker, the head of the eurogroup, said that Spain
would make a formal request for financial assistance by next
Monday. Finance ministers from the 17 eurozone members have offered to lend up to euro100 billion ($127 billion) to Spain to help bail out its banks.
Eurogroup finance ministers met Thursday evening in Luxembourg
to try to find ways to stabilize the euro currency, which is
threatening to crack under pressure of national debts and high
The leaders of the 17 countries that use the euro have been
under global pressure to find a comprehensive solution to the debt
crisis rather than continuing to take piecemeal measures that
provide only temporary relief. At this week's G-20 summit of world
economic powers in Los Cabos, Mexico, politicians including U.S.
President Barack Obama called on Europe to do what was necessary.