THE HEAD of the International Monetary Fund (IMF) Christine Lagarde has urged European leaders to increase the size of it multi-billion euro bailout fund.
She also urged the use of common euro bonds as a tool to prevent the debt crisis from turning into a 1930s style depression – so far such moves are being resisted by Europe’s biggest economy Germany.
“We need a larger firewall,” she said in a speech prepared for Berlin at German Council on Foreign Relations today. “Without it, countries like Italy and Spain, that are fundamentally able to repay their debts, could potentially be forced into a solvency crisis by abnormal financing costs.”
Italy and Spain continue to borrow on the open bond markets but they need the ongoing support of the European Central Bank.
The IMF part-supports the bailout loans to Ireland, Greece and Portugal.
Just last week it announced it wants to increase its funding by $500bn while it will need $1 trillion globally over the coming years.
The IMF is expected to announce lower growth forecasts for most of world tomorrow.