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Nov. 11 (Bloomberg) -- Europe’s debt troubles have turned into a “global crisis,” and the world is willing to step up financial aid if European leaders show a “clear picture” of how to solve the problem, International Monetary Fund Deputy Managing Director Zhu Min said.
“The European crisis is more or less a global crisis,” Zhu told a conference of business leaders and policy makers today on the sidelines of the Asia-Pacific Economic Cooperation forum in Honolulu. “It needs global cooperation and a global solution.”
While the international community is “willing to help,” Europe must first map out an exit, Zhu said.
Zhu’s comments echo those of senior policymakers this week at the meeting of Asia-Pacific nations, where debate about the European debt crisis has often pushed regional issues off the agenda. U.S. Treasury Secretary Tim Geithner yesterday urged European leaders to implement their rescue plans “with the speed that markets require and with the force necessary to restore confidence.”
Canadian Finance Minister Jim Flaherty said in an interview with Bloomberg News yesterday in Honolulu that while Canada believes Europe has the required resources to end the crisis, he won’t rule out providing more money to the IMF to support its efforts to contain the crisis. The IMF is funded by its 187 member countries.
Europe needs to act to prevent its sovereign-debt troubles from turning into a “banking crisis,” a scenario that would threaten the global financial sector and hinder world economic growth, said Zhu.
“That’s the critical issue,” he said. “It’s the reason we’re always urging European governments and the regulators to put more capital into the financial sector.”
European leaders must also take steps to restore confidence in global financial markets and avoid relying too much on austerity measures, an approach that might sap European growth, Zhu added.
The IMF is watching for any spillover from the crisis into the “real economy,” in particular the risk that efforts by European banks to eliminate bad debts could cause credit to dry up, he said.
--Editors: Peter Hirschberg, Paul Tighe
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