The IMF commended some of the proposals crafted so far, including the larger effective size of the bailout program. But it said "the mechanism by which this is to be secured should be clarified as soon as possible." In addition, decisions by Brussels about adapting the interest rate of the program are " urgently needed to help support fiscal sustainability."
The IMF criticized the euro zone for taking so long, a problem complicated by the political divisions between member states. "Adopting a proactive approach rather than a reactive approach is long overdue, and ensuring consistency of policies has become paramount," it said.
Europe's ongoing sovereign debt, budget and growth problems will feature in discussions among finance ministers and central bankers at the Group of 20 largest nations meeting later this week. While EU officials have drafted plans to resolve the crisis and assure markets, the IMF says it has to go further than existing proposals. Economists--and the markets that are lending the euro-zone governments cash to finance their operations--have shown skepticism that the program will be effective unless it comprehensively addresses all the weaknesses. G-20 members fear contagion and are concerned about the European crisis continuing to drag on global growth.
The fund also encouraged the EU to move ahead with planned financial system stress tests, but warned that they would only be effective if accompanied by clear plans to force banks to build larger capital buffers equal to the size of the uncertainty about the value of their assets and shutter "unviable business models and banks."
IMF:Europe Needs To Refine, Strengthen Bailout Program Urgently
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