The head of the International Monetary Fund has said the European Central Bank should cut interest rates and allow higher inflation.
Christine Lagarde, speaking during a visit to bailed-out Ireland, said that would help to ensure a sustained economic recovery.
“Monetary policy should remain accommodative, and we believe that there is still some limited room for the ECB to cut rates further,” Lagarde said.
She urged Europe’s leaders to think more of helping their recession-hit people by not rushing to hit deficit reduction targets.
“With public debt so high, in many of the euro area and European countries, the direction has to be down, and not up. But how fast should it go down? We believe that the pace should be measured and steady; measured and steady also means coming up with credible, medium-term durable measures and sticking to them, rather than focusing exclusively and predominantly on the headline deficit targets.”
The IMF head has also been speaking out on behalf of Ireland – and Portugal – both of which have stuck closely to the economically painful bailout terms imposed by their international lenders.
In return they have asked for those bailout loans to be extended and Lagarde feels Europe should do that and anything else it can to help.
Referring to Ireland, she said “any avenue” should be explored that supported the country’s return to economic growth and self-sufficiency.
And then there’s Cyprus
The next question for Brussels is how much help will Cyprus need.
Talks continue on the terms of a bailout of up to 17 billion euros.
Eurozone officials have said they would like Cyprus to raise its corporate tax and introduce a levy on capital gains and a financial transaction tax to ensure it can repay a bailout.
Russia, which has strong business ties with Nicosia, has also signalled it could consider contributing.
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