Europe grew increasingly uncomfortable as the International Monetary Fund (IMF) kept its woes in the spotlight at its meeting on Friday, October 12.
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The IMF says distressed countries need more time to reduce their budget deficits. But Germany retorted that reversing course on promised debt reductions would damage credibility. Germany is Europe’s largest creditor and its participation is essential to any lasting fiscal reforms.
Proponents of allowing more time said that draconian, single-minded policies could be counterproductive and even backfire.
At the same time, the IMF encouraged swifter policy action in both Europe and the US to bolster investor confidence.
The IMF wants to see Europe make more progress toward its promises to create a tighter fiscal and banking union.
Europe says it is on track to deliver the promised reforms and would instead like to see closer examination of the fiscal issues facing the US.
US Treasury Secretary Timothy Geithner said there will be a window of opportunity
to address the fiscal cliff after the November 6 elections.
The IMF has been trying to reform its policies to give faster-growing emerging economies more say in the international lender and push China to the Number 3 spot behind the US and Europe.
Seeking Congressional approval to increase funding to the IMF has taken a back seat to addressing the budget deficit, a hot-button election issue. The Fund cannot make the desired reforms without US support.