Euro Zone Countries Need To Improve Their Economic Coordination; Dominique Strauss-Kahn

Dominique Strauss Kahn, managing director of the International Monetary Fund, said on Monday that euro zone countries needed to improve their economic coordination in order to avoid large imbalances to build in the system. According to Kahn, the financial crisis of last year exposed the failings of the European Union; however, he believes that it could be a turning point for the EU if its leaders act on the problems and looked for joint solutions.

Speaking at Warsaw’s business school on a visit to Poland, he said, “One of the lessons of the crisis in Europe is that a single currency without enough economic policy coordination may lead to huge imbalances. In the wake of the crisis, European integration must be sped up, not slowed down ... now is the time to take the European project to the next, higher level.”

Kahn said that the lack of coordination among European countries had resulted in mounting concerns over Greece’s crisis. Euro zone countries reached a consensus on a rescue plan for Greece only last week. According to terms of the agreement, the rescue package will involve assistance from euro zone countries and the International Monetary Fund. Many in the euro zone are of the opinion that the imbalances among the countries in the zone have been partly responsible for the problems in Greece. However, Germany, which runs a current account surplus, believes that it is not the imbalances among the countries but lack of fiscal discipline that has led to the debt crisis Greece faces.