IMF calls on ECB to act --- The International Monetary Fund is pleading with the European Central Bank to do more to fix the eurozone crisis. In a report released at 2pm, the IMF said the ECB could, and should, do more to prevent the euro unravelling, arguing: The ECB can provide further defences against an escalation of the crisis.
Its recommendations included :
• considering further interest rate cuts• A "sizeable" quantitative easing package, to stimulate the eurozone economy
• giving the ECB full 'lender of last resort' powers
• restarting its Securities Markets Progamme (to buy up peripheral sovereign debt)
Suggestions 2, 3 and 4 are unlikely to be welcomed by stronger members of the eurozone (think Germany, Austria, Finland...) who could also fear that lower interest rates would drive inflation up.
The IMF, though (which expects the eurozone to contract by 0.3% this year) is again insisting that the ECB must do more: These could include policies to support demand in the short run and fend off downside risks to inflation, as well as measures to ensure that monetary transmission, currently impaired by financial stress in some countries.
There are problems with the IMF's suggestions, though. QE would probably drag down the yields on safer bonds (awkward, when some are in negative territory already), while Germany is wedded to the idea that closer fiscal union needs to be arranged before the ECB is granted more powers.
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