IMF: Global Confidence "Very Fragile"

Euro-Crisis main risk to global economic outlook

(Reuters)—The International Monetary Fund urged European policymakers to deepen the financial and fiscal ties within the euro area with some urgency to restore sagging confidence in the global financial system.

In its semi-annual check on the world's financial health, the Fund said the euro area's debt crisis was the main threat and the risks to global financial stability had risen in the last six months, leaving confidence "very fragile".

The euro area's plodding progress means European banks are likely to offload $2.8 trillion in assets over two years to cut their risk exposure, an increase of $200 billion from a prediction six months ago, the IMF estimated. That could shrink credit supply in the periphery by 9 percent by the end of 2013, crimping economic growth.