The IMF Goes Bearish on the Eurozone

'The euro area is in an uncomfortable and unsustainable halfway point. While it is sufficiently integrated to allow escalating problems in one country to spill over to others, it lacks the economic flexibility or policy tools to deal with these spillovers.

Crucially, the euro area also lacks essential financial and fiscal policy tools to stabilise the monetary union. As the crisis has illustrated, without a strong common financial stability framework, banking problems are hard to contain and resolve in an integrated market....

The deepening of the crisis suggests that its root causes remain unaddressed. The crisis calls for a much stronger collective effort now to demonstrate policymakersâ?? unequivocal commitment to sustain EMU. Only a convincing and concerted move toward a more complete EMU could arrest the decline in confidence engulfing the region."

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'The IMF could hardly be clearer. It is a pre-emptive move to pin responsibility for the coming deluge exactly where it belongs:

On those who created this doomsday machine and pushed it through as a federalist Trojan horse, with scant concern for Europeâ??s democracies; on a second group of people who ran it for a decade with high-handed arrogance, disregarding warnings as the North-South gap grew to dangerous levels; and on a third group of leaders â?? led by Chancellor Angela Merkel â?? who now refuse to face up to the awful implications of what has happened.

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