AN AGREEMENT reached by European countries for deeper economic integration was a step in the right direction but not a complete solution for the euro zone’s debt crisis, International Monetary Fund chief economist Olivier Blanchard said yesterday.

“I’m actually more optimistic than I was a month ago; I think there has been progress,” he said at a conference in Tel Aviv.

“What happened last week is important: it’s part of the solution, but it’s not the solution,” Mr Blanchard added.

All eyes will be on markets today in what will be the first full day of trading following Friday’s deal.

European leaders agreed to draft a new treaty for deeper euro zone economic integration, although Britain, the region’s third largest economy, refused to join the 17 euro states and nine other EU countries in the deal.

EU leaders also agreed euro zone states and others should provide up to €200 billion in bilateral loans to the IMF to help tackle the crisis, with €150 billion coming from countries in the euro currency.

Meanwhile, Germany’s top central banker cooled speculation the European Central Bank would extend its role.

Bundesbank president Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitungthat while the new accord represents progress, the onus was on governments rather than the Frankfurt- based ECB to resolve the crisis with financial backing.

“The mandate for redistributing taxpayer money among member states clearly does not lie in monetary policy,” Mr Weidmann said.

“Financing of sovereign debt through central banks is and remains forbidden by treaty.” – (Reuters/Bloomberg)