ECONOMY

IMF fears crisis may spread in the EU

Greece’s fiscal crisis may spread to other European countries amid investor concern that it may not be able to make its debt payments without aid, the International Monetary Fund said. «The main risk is that, if unchecked, market concerns about sovereign liquidity and solvency in Greece could turn into a full-blown sovereign debt crisis, leading to some contagion,» the IMF said yesterday in its World Economic Outlook. «This reinforces the importance of efforts by Greek authorities to re-establish the credibility of their fiscal policy.» The International Monetary Fund on Tuesday called Greece a «wake-up call» on the threat of international sovereign debt risks, saying in a report that rising government debt has replaced financial industry stress as the biggest threat to the world’s economy. Meanwhile, rating agency Standard & Poor’s said yesterday that it does not expect Greece to default but if it did European banking systems could be affected. «If our assumptions are wrong and it does restructure its debt, it will have spillover effects, particularly for the European banking systems,» John Chambers, chairman of S&P’s sovereign rating committee, told Reuters. S&P has a BBB-plus rating on Greece, the third-lowest investment grade. The outlook is negative, indicating a downgrade is more likely than an upgrade. Finance Minister Giorgos Papaconstatinou yesterday described talk of Greece being forced to restructure debt as being «nonsense.»