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IMF Chides Eurozone Ministers for Inaction

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The head of the International Monetary Fund (IMF) criticized the member nations of the eurozone on Tuesday for failing to take forthright action in response to the crisis of confidence over the past weeks.

According to a Reuters report, Dominique Strauss-Kahn, IMF managing director, said after an Athens meeting with Greek Prime Minister George Papandreou, “The eurozone has to provide a comprehensive solution . . . The piecemeal approach, one country after another, is not a good one.” Lack of action has caused turmoil in European markets since last week.

On Monday, Strauss-Kahn had called for an increase in the rescue facility and a more aggressive bond purchase policy on the part of the European Central Bank (ECB). Neither action was taken, and German Chancellor Angela Merkel dismissed any need for additional contributions by member nations to the rescue facility. A call for a eurozone-issued bond, or E-bond, had been proposed by Giulio Tremonti, Italy’s finance minister, and Jean-Claude Junker, Luxembourg’s prime minister, but the topic was not discussed in the Monday evening meeting.

While Germany has been the most outspoken against proposed additional action, on Wednesday the Czech Republic announced that it would not take part in any additional rescue mechanism. It already has abstained from joining the European Financial Stability Facility (EFSF). According to a Reuters report, Czechs, wary of joining the eurozone, have been reluctant to set an entry date to adopt the currency. A member of the European Union (EU) but not of the eurozone, Czechs oppose a fiscal union that would more firmly tie together the countries in the group. It also opposes E-bonds, and speaking before its senate on Wednesday, Defense Minister Alexander Vondra said that the country should support stipulations in the EU treaty to ban them.

Midday trading in Europe saw shares and the dollar rising and gold falling; insurers’ increases offset miners’ and commodities’ losses, including copper, which has soared lately but is now off its highs. Expectations were strong, both on the expected Irish bailout and on a proposed tax deal in the U.S. Treasuries, on the other hand, saw prices fall sharply with the 10-year yield rising as worries about the expensive tax deal in the U.S. took the upper hand.


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