Bloomberg News

IMF’s Lagarde Urges ‘Proper, Expedited’ Debt Action by Italy

November 13, 2011

(Updates with Lagarde quote in second paragraph.)

Nov. 12 (Bloomberg) -- International Monetary Fund Managing Director Christine Lagarde urged Italy to implement its debt reduction steps in a “proper, expedited, solid” way.

Italian bond yields reached levels “that are difficult to sustain in the long run,” Lagarde told reporters in Tokyo today. If Italy proceeds with its debt plan as Europe moves to resolve its crisis, “then clearly the situation will be clarified and should improve significantly. But it’s going to be a matter of steady, solid, sustained implementation of measures which are sometimes difficult.”

European stocks advanced yesterday after the Italian Senate approved an austerity package, raising optimism that the euro area’s second-most-indebted country will control its debt. The region’s fiscal woes have turned into a “global crisis,” IMF Deputy Managing Director Zhu Min said yesterday.

The Stoxx Europe 600 Index increased 2.4 percent to 240.98 at the close in London yesterday. The gauge erased earlier losses and rose 0.5 percent for the week on expectations a new government led by former European Union Competition Commissioner Mario Monti will take charge in Italy.

The Senate in Rome voted 156 to 12 to pass the package of measures promised to the European Union in a bid to boost growth and cut Italy’s debt of 1.9 trillion euros ($2.6 trillion). Italian yields this week climbed above the 7 percent level that spurred Greece, Ireland and Portugal to seek bailouts.

No Country ‘Immune’

“No country can be immune under the present circumstances,” Lagarde said. “No matter how developed or how emerging or how far away it is. Countries are totally interconnected.”

She spoke in Tokyo, during a two-day stay in which she met with Finance Minister Jun Azumi, Bank of Japan Governor Masaaki Shirakawa and Shozaburo Jimi, the financial services minister. Lagarde visited Beijing earlier in the week.

Turning to Japan, Lagarde expressed approval for its yen- selling intervention, while also saying that such operations are more “efficient” when conducted together with other nations.

“We take the view that concerted action is the most efficient way of intervening,” Lagarde said. Japan’s efforts to quell disorderly exchange rate moves are “very much in the spirit” of the Group of Seven nations’ stance, she said.

Azumi said on Oct. 31 that he ordered unilateral intervention after the yen climbed to a post-World War II high against the dollar. Japan sold yen together with G-7 partners in March, and intervened by itself in August.

Lagarde said in a statement today she agreed with Japanese officials that the nation should make it a priority to adopt a “strong medium-term plan” to cut public debt.

The IMF chief also said it’s important for the BOJ to keep its “accommodative” monetary policy stance and for the government’s spending for reconstruction after the March 11 earthquake to be swiftly implemented.

--Editor: Ken McCallum, Jim McDonald

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net


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