IMF – EU Treaty Agreement A Partial Solution

• Tweet

The treaty agreement by euro zone countries on Friday not a complete solution for the euro zone’s debt crisis according to the International Monetary Fund (IMF) chief economist Oliver Blanchard.

“I’m actually more optimistic than I was a month ago, I think there has been progress,” Blanchard told the Globes business conference in Tel Aviv.

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

Blanchard did not elaborate on what further steps were needed.

The new agreement will see euro zone economies integrate even more. There was opposition from Britain though who refused to ratify the treaty. European leaders also agreed they should provide 200 billion euros in bilateral loans to the IMF in order to help struggling EU economies.

“The commitment to give us 200 billion euros makes a major difference in the sense that we can now go out and talk to other countries and say, ‘the Europeans have given us money, can you help?,” Blanchard said.

“Whether this gives us the whole bazooka or not, I hope so.”

When asked if diverse statements from EU policymakers were causing volatility in the markets, Blanchard responded, “A lot of the volatility is coming from statements from Europe, showing the range of opinions and inability to get to a logical decision process.”

This agreement did help the markets on Friday as the major indices all saw gains of more than 1.5%. Now let’s see how long this agreement can keep uncertainty out of the market.