Eurozone threat looms over IMF meeting

Sunday, September 18, 2011
By Paul Martin

EU’s failure to resolve Greek problem adds to tensions as world’s finance ministers and central bankers gather at IMF

Nick Fletcher
Guardian.co.uk
Sunday 18 September 2011

Investors are poised for another week of turmoil in the global financial markets as finance ministers and central bankers gather in Washington for the International Monetary Fund’s annual meeting amid the biggest crisis since the collapse of Lehman Brothers three years ago.

A weekend meeting of EU finance ministers in Poland failed to resolve any of the issues in the beleaguered eurozone, instead casting more doubt over the future of Greece by delaying a decision on a much needed €8bn (£7bn) bailout payment until next month. Reports in Greece suggested the EU, IMF and European Central Bank were asking for further austerity measures, including 100,000 public sector job cuts, in an attempt to resolve Greece’s budget deficit and avoid a default.

Greece’s prime minister, George Papandreou, who has cancelled plans to attend the IMF meeting in favour of dealing with the crisis, held an emergency cabinet meeting on Sunday to discuss additional cutbacks before a conference call with the EU and the IMF on Monday.

Meanwhile Moody’s is expected to announce imminently whether it plans to downgrade Italy’s credit rating, a move that would escalate the European debt crisis and cause problems for French banks exposed to the country’s debt.

Many observers believe last week’s news of a co-ordinated plan by five central banks to pump dollars into the system was designed to improve liquidity in the event of further turmoil. But the political pressures within the eurozone were in focus once more following a predicted defeat for German chancellor Angela Merkel in another state election at the weekend.

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