IMF puts pressure on EU

International Monetary Fund chief Christine Lagarde called Wednesday for the European Union to push forward with banking reforms particularly on its periphery, dpa reported.

"The priority must be to continue to clean up the banking system by recapitalizing, restructuring, or - where necessary - shutting down banks," she said in an advance text of an address delivered to the Economic Club of New York.

The still insufficient banking reforms - nearly five years after the 2008 financial meltdown on Wall Street - have left EU monetary policy "spinning its wheels" and unable to transmit the benefits of low interest rates to the small and medium-sized businesses that could best deliver significant economic growth.

"The plumbing is clogged up," Lagarde said.

The eurozone has slipped back into recession, as Spain, Italy and Cyprus have battled fiscal crises, on top of past bailouts of Greece, Ireland and Portugal led by the EU, IMF and European Central Bank.

"Especially in the periphery, many banks are still in an early stage of repair - not enough capital and too many bad loans on their books," Lagarde said. "Even outside the periphery, there is a need to shrink balance sheets, reduce reliance on wholesale funding and improve business models."


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