January 23, 2012
The head of the International Monetary Fund said on Monday the eurozone needed a bigger firewall to prevent Italy and Spain sliding towards default, underlining Europe’s responsibility in solving its own sovereign debt crisis.
In a speech in Berlin, Christine Lagarde, IMF managing director, said that without a larger bail-out fund, fundamentally solvent countries like Italy and Spain could be forced into a financing crisis.
“This would have disastrous implications for systemic stability,” she said.
Ms Lagarde said that the eurozone authorities needed “a clear and credible timetable” to fold the existing European Financial Stability Facility (EFSF) into the new European Stability Mechanism (ESM), increase its size and ensure support from the European Central Bank.
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