IMF warns EU against excessive budget cuts

The IMF pressed the eurozone Wednesday to resolve its debt crisis, saying a solution is long "overdue," and warned governments against pursuing drastic budget cuts at the expense of growth. "Finding a durable solution to the euro area sovereign crisis has become more than overdue," the IMF said in its regional economic outlook for Europe released in Brussels. "(This) will require some difficult decisions to improve crisis management and a demonstration of unity behind the project of economic and monetary union that will convince markets," it said. Eurozone leaders agreed in July to expand the monetary union's rescue fund and provide Greece with a second bailout to stem debt crisis contagion. But implementation has been delayed because a handful of parliaments have yet to approve the package. With austerity sweeping across Europe, the IMF said governments with sound finances should avoid drastic cuts and instead ensure growth is protected. "The pursuit of nominal deficit targets should not come at the expense of risking a widespread contraction in economic activity," the IMF said. Countries with access to funding "at historically low" interest rates "should consider delaying some of their fiscal consolidation," it said, referring to nations with good credit ratings such as Germany and France. These nations should "consider allowing automatic stabilisers work fully," the IMF said, referring to measures which help support economies during downturns. The International Monetary Fund also said "monetary tightening in the cyclically more advanced economies will need to be paused or even reversed."