Friday 23 February 2018

Euro banks may face €2.8trn asset sale

IMF chief Christine Lagarde says Spain is not in need of any loans
IMF chief Christine Lagarde says Spain is not in need of any loans

IMF chief Christine Lagarde says Spain is not in need of any loans.Thomas Molloy

THE IMF said European banks may need to sell as much as €2.8trn in assets next year if leaders fail to stem the fiscal crisis.

That would damage growth in countries like Ireland, it added.

The IMF warns in its Global Financial Stability Report published yesterday that failure to meet existing targets would hurt lending still further and crimp growth by four percentage points next year in Ireland, Greece, Cyprus, Italy, Portugal and Spain.

Forced sales of assets would push down the value of commercial property -- damaging banks still further and organisations such as the National Asset Management Agency, which holds vast swathes of commercial property.

IMF managing director Christine Lagarde indicated, meanwhile, that the fund doesn't need to lend money to Spain to help the country tackle its fiscal crisis.

"Some people say unless you have skin in the game, meaning money, you are not really respected, you are not heard," Mrs Lagarde said in a Bloomberg Television interview.

"I am not so focused on that as I am on the monitoring. I think we would rather act in our framework, use one of the tools that is frequently used, but as I said we can be flexible."

The IMF Washington-based fund earlier this week cut its global growth forecasts and warned of even slower expansion if European officials don't address threats to their economies.

While the ECB's plan to purchase bonds of debt-burdened countries has pushed down bond yields, officials are waiting for a bailout request from Spain before putting the programme into action.

The fund also urged European policymakers to deepen the financial and fiscal ties within the euro area with some urgency in order to restore sagging confidence in the global financial system.

The IMF's stark tone on the euro-area debt crisis in its semi-annual check-up of the world's financial health was in marked contrast to the mood in Europe, where an ECB decision to buy bonds of countries that accept an assistance programme has removed immediate concerns about the survival of the euro. It said the debt crisis was the main threat to global financial stability.

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