International Monetary Fund managing director Dominique Strauss-Kahn said Europe's sovereign debt crisis isn't over and signaled that Germany must do more to ease growth imbalances within the euro region.
"The sovereign crisis is not over," Mr Strauss-Kahn said today in a speech at the European Banking Congress in Frankfurt, Germany, without referring directly to the current turmoil in Ireland. "The wheels of cooperation move too slowly. Repairing the financial sector is taking too long, in part because policy makers are not paying enough attention to the pan-European dimension."
IMF officials arrived in Dublin yesterday with European Union representatives to review the books of the country's financial institutions, preparing the way for a bank bailout. While Germany led the push for Ireland to seek aid to prevent the debt crisis spreading through the euro area, Mr Strauss Kahn said Europe's largest economy should do its part to help the currency area.
"Just like we worry about global imbalances, we should worry about imbalances within the euro area," he said. "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 become more domestically driven."
US Treasury Secretary Timothy Geithner said last month that countries with large trade surpluses - which include China, Japan and Germany - need to do more to boost growth within their economies. German Finance Minister Wolfgang Schaeuble has rebuffed criticism, saying on October 9th that "strong" import growth "implies that Germany contributes to the global recovery."
Europe's economic expansion slowed to 0.4 per cent in the third quarter from 1 per cent in the previous three months as governments stepped up budget cuts to reduce deficits and restore investor confidence.
Mr Strauss-Kahn said the global financial crisis exposed economic "fault lines" in the EU, and leaders should deepen cooperation to sustain economic growth or risk lagging other regions. The Washington-based IMF said on October 6th that developing nations will grow 6.4 per cent next year, almost three times the pace projected for industrialised economies including Europe and the US.
"As the post-crisis world takes shape, Europe risks being left even further behind, especially as the dynamic regions of the world are bolting out of the stables," he said. "The only answer is more cooperation, and greater integration."
Bloomberg