Firewall against euro crisis crucial: IMF official

Updated: 2011-11-13 16:45


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HONOLULU, US - The global economy has shifted from a "two-speed recovery" phase to a post-crisis "two-speed growth" era, and this might continue for a long time to come, Zhu Min, deputy managing director of the International Monetary Fund (IMF), has said.

The emerging markets will continue to play a leading role in global economic growth, but the lingering eurozone debt turmoil and waning external demand are weighing on market confidence and the growth of emerging economies, Zhu said in an interview with Xinhua here on the sidelines of the Asia-Pacific Economic Cooperation (APEC) meetings.

The eurozone debt turmoil was more or less a global crisis that needed global efforts to address the challenge, but eurozone leaders should endeavor to chart the course of how to solve the problem first, he said.

To contain risks stemming from the debt turmoil, European leaders last month agreed on a policy framework to restore debt sustainability in Greece, recapitalize European banks, strengthen the firewall against financial contagion and lay the foundation for robust economic governance in the region.

However, investors believed that details of the package still need to be hammered out to avoid market gyrations.

The advanced economies will face a tough set of challenges in the coming years, including sluggish consumption growth partly due to the slow household deleveraging process, a weak property sector as well as high unemployment, Zhu said.

He also called for the establishment of "two firewalls" to protect the real economy and stop the contagion triggered by the eurozone debt crisis.

The first firewall, he said, is targeted at checking the contagion of debt crisis spreading from Greece to other large-size eurozone economies including Italy, while the second one is aimed at preventing the sovereign debt crisis from causing banking sector stress.

It is extremely important to make sure the real economy would be well financed and not hit hard by the financial turmoil, Zhu said.

He said that the proposal made by APEC finance ministers at the ongoing APEC meetings to create an infrastructure fund to shore up future investment and measures to help fund the development of smaller businesses was important.