The full statement issued by the IMF on the state of the eurozone (see 14.29) is now online here.
It includes this blunt warning:
The euro area crisis has intensified. Adverse links between banks, sovereigns, and the real economy have deepened, driving sovereign borrowing costs and risk premiums to record levels. Investors are withholding funding from member states most in need, moving capital "north" and abroad to perceived safer assets. This has contributed to divergences in liquidity conditions and lending rates within the euro area, adding to already-severe pressures on many bank and sovereign balance sheets and raising questions about the viability of the monetary union itself.
Economic activity has weakened and is likely to remain subdued, particularly in the hard-hit periphery countries.
Updated at 14:44 BST
IMF calls on ECB to act
The International Monetary Fund is pleading with the European Central Bank to do more to fix the eurozone crisis.
In a report released at 2pm, the IMF said the ECB could, and should, do more to prevent the euro unravelling, arguing:
The ECB can provide further defences against an escalation of the crisis.
Its recommendations included
• considering further interest rate cuts
• A "sizeable" quantitative easing package, to stimulate the eurozone economy
• giving the ECB full 'lender of last resort' powers
• restarting its Securities Markets Progamme (to buy up peripheral sovereign debt)
Suggestions 2, 3 and 4 are unlikely to be welcomed by stronger members of the eurozone (think Germany, Austria, Finland...) who could also fear that lower interest rates would drive inflation up.
The IMF, though (which expects the eurozone to contract by 0.3% this year) is again insisting that the ECB must do more:
These could include policies to support demand in the short run and fend off downside risks to inflation, as well as measures to ensure that monetary transmission, currently impaired by financial stress in some countries.
There are problems with the IMF's suggestions, though. QE would probably drag down the yields on safer bonds (awkward, when some are in negative territory already), while Germany is wedded to the idea that closer fiscal union needs to be arranged before the ECB is granted more powers.