9 Apr 2014
IMF warns weak EU banks, low US rates can hurt global recovery
FXStreet (Barcelona) - The International Monetary Fund said today that global recovery could be hampered by the instability of the EU banking system. China's slowdown, the end of low rates in the US and potential tensions in emerging markets were other adverse factors mentioned by the organization.
The IMF urged EU officials to step up efforts to create a common backstop for failing banks and launch the banking union as soon as possible in order to prevent further destabilization.
Moreover, the fund warned that keeping rates low for an extended period of time in the US would make the QE exit even more difficult
“The key message is that strong policy actions are needed to definitely turn the corner from the great financial crisis and engineer a successful shift from 'liquidity-driven' to 'growth-driven' markets,” said José Viñals, IMF financial counselor.
He also pointed to the problems in emerging markets where corporations will become more vulnerable to shocks along with the tightening of financial conditions.
“Higher debt loads and lower debt servicing capacity make corporates more sensitive to tighter external financing conditions and to a potential reversal of capital flows that could trigger a rise in borrowing costs and a drop in earnings,” Viñals suggested.
The IMF urged EU officials to step up efforts to create a common backstop for failing banks and launch the banking union as soon as possible in order to prevent further destabilization.
Moreover, the fund warned that keeping rates low for an extended period of time in the US would make the QE exit even more difficult
“The key message is that strong policy actions are needed to definitely turn the corner from the great financial crisis and engineer a successful shift from 'liquidity-driven' to 'growth-driven' markets,” said José Viñals, IMF financial counselor.
He also pointed to the problems in emerging markets where corporations will become more vulnerable to shocks along with the tightening of financial conditions.
“Higher debt loads and lower debt servicing capacity make corporates more sensitive to tighter external financing conditions and to a potential reversal of capital flows that could trigger a rise in borrowing costs and a drop in earnings,” Viñals suggested.