IMF warns that Europe's debt problems are risk to financial stability

Guardian
April 13, 2011

Risks of a fresh banking crash have diminished over the past six months, but the financial system remains fragile four years after the crisis that took the global economy to the brink of meltdown, according to the International Monetary Fund.

In its half-yearly Financial Stability Report, the Washington-based IMF said that the sovereign debt problems affecting Europe and the vulnerability of banks posed risks to stability and economic recovery.

The IMF advised policymakers in member countries to address the legacy of high debt burdens in rich western economies, to develop a more robust financial system, and to guard against the overheating and build-up of financial imbalances in emerging nations.

Low interest rates and quantitative easing had boosted the appetite for risk, the IMF said, warning that "easy monetary and liquidity conditions may be masking underlying vulnerabilities".

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