IMF calls for ECB action, direct eurozone aid to banks

Other News Materials 22 June 2012 02:47 (UTC +04:00)

International Monetary Fund (IMF) chief Christine Lagarde on Thursday challenged the eurozone's response to its debt crisis, calling for more action from the European Central Bank (ECB) and direct aid injections into struggling banks, dpa reported.

Lagarde said that the currency bloc needs "a more creative and inventive monetary policy" that might involve a reactivation of the ECB's bond-buying programme, which last year was instrumental in pushing down Italy and Spain's borrowing costs.

The IMF chief also criticized current plans to rescue the Spanish banking sector via loans to the government in Madrid, a plan that has spooked markets because it will increase the country's level of indebtedness.

"Clearly the preference of the IMF ... is to try to break this negative loop between banks and sovereigns that arises from ... the injection of loans directly to the state towards the banks," she said. "We certainly hope that wisdom can prevail."