IMF sees major Euro banks selling $4.5 trillion in assets
Tokyo, Japan (4E) – The International Monetary Fund (IMF) said that unless policy makers can find a solution to its fiscal crisis, it projects that European banks could to sell as up to $4.5tn of in assets through 2013, which is an increase of 18 per cent from its previous estimate announced in April.
According to its Global Financial Stability Report, the IMF said that failure by the Europeans to tighten fiscal policy or to create a common supervisory system within the agreed timeframe could leave 58 European Union banks no choice but to reduce their assets. This could result to a 4 per cent growth decline in Italy, Spain, Portugal, Ireland, Greece and Cyprus as credit will likely suffer.
The IMF warning came a day after it cut its growth forecast for the UK in a rate higher than most developed countries.
On Monday, the Washington-based lender also announced that it lowered its global growth forecast and advised European officials to address issues that threaten their economies or else growth could slip further.
The IMF said that the bond-buying program by the European Central Bank (ECB) bought time for cash-strapped countries to take action, although it warns that disagreements over the implementation of a banking union and Spain’s reluctance to request for a formal bailout could see borrowing costs soar.