WASHINGTON — The Institute of International Finance urged Eurozone leaders on Thursday to accelerate global economic growth by easing Greece’s bailout, increasing public investment in the country and cutting interest rates on the troubled nation’s remaining debt.
Charles Dallara, the managing director of IIF, also said the European Central Bank should open its newly launched bond-buying program, the Outright Monetary Transactions, to Portugal and Ireland so these countries can consolidate progress on the debt issue.
Dallara argued that Eurozone leaders need to move “more decisively to implement the announced measures in a timely manner to avoid a reversal broadly positive market sentiment.”
“Member countries facing intensified difficulties should agree to appropriate conditionality to allow the ESM (European Stability Mechanism) and the ECB to purchase their bonds,” he said.
ECB President Mario Draghi said in a press release on Thursday that the bank is ready to start buying bonds from troubled member countries as soon as they fulfill the necessary requirements.
Dallara also suggested the bank and International Monetary Fund cut the interest rate on Greece’s remaining debt rather than pushing for a debt-clearing plan.
“We wiped out 70 plus percent of the value,” he said. “There’s no reason why the Eurozone continue to charge. It would accelerate their restoration.”
Despite the steps made by the troubled countries, Dallara pointed out that a “reorientation in an overall approach” is essential to restore growth.
“What we feel is missing is a reorientation in an overall approach which in our view should focus much less on short term deficit, the GDP (Gross Domestic Product) targets, and much more on measuring and evaluating the measures (and) the policies that the countries are making,” he said.
“The world economy appears to be stuck at the crossroads, being pushed in one direction by easier monetary policy, and pulled in another by fiscal austerity,” Dallara wrote in a letter to the International Monetary Fund’s committee dated Thursday. “We call on the global policy making leadership to act cohesively and give a clear direction.”
“Without global coordination, the downside risks are substantial,” he said.
The Washington-based IIF is a global financial institute of more than 460 financial institutions with a mission to support global financial stability.