IMF warns of eurozone risks

CNC report from Washington
Added On July 26, 2013

The International Monetary Fund has released an annual review on eurozone's economic conditions, in which the 17 eurozone countries are warned of possible severe downturn.

The Washington DC-based international lending agency says the countries using the euro have gone some way to boosting confidence in their monetary union's long-term viability. 
But "recovery remains elusive" for the region because of tensions in financial markets, high borrowing costs for small businesses in the weaker economies and reticence by consumers to spend. 

The IMF wants greater progress made on repairing the balance sheets of banks, so that lending can be kick-started.

It also said that further cuts to interest rates by the European Central Bank may be necessary to boost growth.

It called for more reforms in the banking sector, including the re-capitalization of weak, but viable banks, and the closure of "non-viable" banks.

The IMF also urged greater flexibility in the eurozone's labor market, including the removal of barriers to protected professions.

It predicted that the eurozone's GDP will contract by 0.6 percent this year, before expanding by 0.9 percent in 2014.