IMF's Lipsky Says Euro Threat `Wildly Exaggerated'
By Vivian Salama - Nov 30, 2010 5:00 PM GMT+0100 Tue Nov 30 16:00:37 GMT 2010
International Monetary Fund First Deputy Managing Director
John Lipsky said that the euro has a “solid” value and that any notion that the currency is under threat is exaggerated.
“Shoring up the euro is a rather loaded phrase,” Lipsky said in an interview in Dubai today at the World Economic Forum Summit on the Global Agenda, when asked about efforts to support the currency zone. “The euro trades very freely all day, every day. The value is solid and it seems broadly appropriate. Sure, there are near-term concerns of one type or another,” though “the notion that the euro is under threat is wildly exaggerated given what’s happening in markets.”
The euro today fell below $1.30 for the first time in more than 10 weeks amid speculation Europe’s debt crisis will spread. European Union finance ministers on Nov. 28 confirmed their second bailout of a euro nation after rescuing Greece in May, handing Ireland an 85 billion-euro package ($111 billion) to rescue its banks and bolster government finances.
Actions taken on Ireland are “very important” but were never expected to “assuage all market uncertainty,” Lipsky said.
“After all, the Greek program is on track and yet markets are still frankly skeptical about its success.”
Lipsky said the actions in both Ireland and Greece give their governments “breathing space to make the adjustments they need” and “to convince market participants of the success of their efforts.”
‘Proportionate’ Action
Blanket solutions will not work, Lipsky said, and preventing a contagion will depend on whether governments continue to take the appropriate actions.
“What’s important is that the responses are proportionate to the challenges,” he said. “It will require continued vigilance and delivery on promises by authorities.”
The cost of insuring the debt of Italy, Spain, Portugal and Ireland surged to records today as Europe’s sovereign crisis intensified.
“In Spain, dealing with the cajas, the savings and loans, is going to be accelerated along with a series of other measures in addition to other measures to increase Spain’s competitiveness,”
Lipsky said. “It will take time, effort and delivery on promises.”
(Bloomberg)
