IMF: euro zone debt crisis threatens economic recovery

The International Monetary Fund is warning the euro zone’s sovereign debt crisis is a threat to economic recovery.

It said the countries using the euro must cooperate more to contain the crisis and get their budgets under control to restore confidence.

With its acting head John Lipsky in Luxembourg for the talks on Greek aid, the IMF released its regular report on the euro zone.

After 1.8 percent growth last year, it is now projecting the bloc’s economic expansion will be greater than previously expected this year at two percent, followed by a softening in 2012 to 1.7 percent.

The IMF report warned of “daunting challenges” for periphery economies – like Greece – with very high debt levels, severe competitiveness problems, and fragile banking systems.

It said unless the euro zone takes decisive action, market worries could spread from periphery to core countries and even beyond.

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