“CONFIDENCE IN the global financial system has become very fragile,” the IMF warned today in its third major report on the global economy published over the past 24 hours.

In this morning’s Global Financial Stability Report, the fund repeated its support for the implementation of euro area leaders’ June 29th agreement on bank and government debt. “For countries facing a severe feedback loop between banks and sovereigns, banks need direct support from the existing crisis management facilities,” it said.

Yesterday the IMF announced that it was keeping its forecasts for the Irish economy largely unchanged, but said that it believed the world economy would be weaker than previously expected over the next year.

Its latest World Economic Outlook report, launched in Tokyo yesterday, added to the gloom induced by poor economic data in recent weeks from many parts of the world. Despite this, world market’s were little affected yesterday by the Fund’s downbeat message.

The IMF was relatively upbeat on this economy’s prospects, forecasting one of the highest rates of gross domestic product growth in the euro area next year.

Responding to the forecasts, the Minister for Finance, Michael Noonan, said “the fact that the IMF sees Ireland growing for a third consecutive year, despite the continuing uncertainty in Europe and the global economy, is very encouraging and highlights the progress that Ireland is making”.

Yesterday the fund said that “in Ireland, continued substantial fiscal consolidation in line with the targets under IMF-supported programmes has helped restore access to international capital markets. In July – six months earlier than expected – the country raised €4.2 billion in new funds by issuing its first long-term bonds since end-2010”.

The IMF also included a brief assessment of the impact of the recession in Ireland on poverty and inequality. In its Fiscal Monitor report it concluded that both had worsened, but “only slightly”.