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IMF chips World Economic Outlook

Spain, Italy warned to contain debt crisis

IMF chips World Economic Outlook

(ANSA) - New York, July 16 - The International Monetary Fund reduced estimates for global growth in 2012 and 2013 Monday while warning eurozone countries to keep up momentum to contain its sovereign-debt crisis. The IMF predicted the global economy will grow 3.5% in 2012, or 0.1% less than its April estimate, according to the latest update to the "World Economic Outlook" report. The IMF chipped 0.2% from its 2013 global-growth estimate, which now stands at 3.9%. The IMF accompanied adjustments to European economic indicators with cries for continued action on that front. IMF chief economists pressured Italy and Spain to keep up their financial discipline in statements on Monday and warned at the same time that the debt-laden countries cannot carry the burden alone. Olivier Blanchard said Italy and Spain have taken "important steps in the right direction, but they will succeed only if they can finance themselves at reasonable interest rates. As long as the governments are committed to reform, the other members of the euro area should be inclined to help them to make adjustments achievable". Blanchard underlined, however, the importance of keeping the pace of reform. "The countries under pressure must continue public-finance reforms, structural reforms and the recapitalization of banks if and when necessary," he said. The IMF's head of markets, Jose' Vinals, warned new financial turmoil may loom on the horizon. "Time is about to run out. It is time to act," he said. The IMF raised its estimates for Italy's national debt Monday, adjusting it upward by 2.5% in 2012 to 125.8%, and by 2.6% in 2013 to 126.5%. The IMF also said Germany's debt is destined to rise 3.3% and 2.7% over April estimates. The increase is due to the countries' obligations to the European Financial Stability Facility (EFSF), an institution financed by member countries of the eurozone to address the sovereign-debt crisis. The IMF confirmed its April estimate of the Italian economy's growth prospects, saying its GDP will contract by 1.9% in 2012. Thanks to planned budget cuts and revenue-raising reforms, the IMF reckons Italy will achieve a slight structural surplus in 2013 despite the pressure of this year's recession on tax revenue. The IMF foresees Spain's troubles prolonged into 2013. The IMF confirmed its estimate of a 1.5% contraction for Spain's economy in 2012, but docked its growth estimate for 2013 by 0.7%, to just 0.6%. Meanwhile, 0.3% was shaved from GDP growth for France in 2012, while Germany's GDP is expected this year to outperform the April estimate by 0.4%.

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