IMF REACTION:INTERNATIONAL MONETARY Fund head Dominique Strauss-Kahn has said Germany should do more to help Ireland and other distressed euro zone members by reducing its own budget imbalances.
The IMF head warned that Europe's financial security depends on the EU "finishing the job" of greater political and fiscal integration. Ireland was the elephant in the room at yesterday's Frankfurt conference, attended by European finance ministers and the heads of the European Central Bank and the US Federal Reserve.
Only Greece's finance minister tackled Ireland head on, saying Dublin was "at the point where decisions have to be taken" on external assistance.
Without naming Ireland, Mr Strauss-Kahn said the EU sovereign crisis was far from over because member states are "not paying attention to the pan-European dimension".
"Growth in Europe, and especially the euro area, needs to become more balanced," he said. "It is simply not true that surpluses are good and deficits are bad. For growth to be sustainable, current account deficits in some European countries will need to shrink, and in parallel in other countries - such as here in Germany - growth will need to be more domestically driven."
Mr Strauss-Kahn suggested that for a "holistic growth strategy", the EU needs greater fiscal disciplinary measures. "The wheels of co-operation move too slowly. The centre must seize the initiative in all areas key to reaching the common destiny of the union," he said, "especially in financial, economic and social policy. Countries must be willing to cede more authority to the centre."
To prevent national bias, however, control should rest with the European Commission or a new body rather than the European Council, where heads of state meet.
His frustration was picked up by European Central Bank (ECB) president Jean-Claude Trichet, who said prolonged budgetary imbalances were a "recipe for the next crisis".
Senior ECB officials said they were confident Dublin would accept external assistance sooner rather than later, and that a "compromise" on corporate tax would be part of the package.
On and off the record, several bank officials warned of a growing addiction among EU banks to ECB funds, a matter of concern in Frankfurt, because the banks will not be able to rely on these funds indefinitely.
"We made very clear that this [bond-buying] is a transitory measure," said Axel Weber, president of Germany's Bundesbank.