The Euro Declines Amid Pessimistic Forecasts From the IMF

The euro was hit hard Tuesday night, beginning Wednesday morning at 1.2859, after the International Monetary Fund named the eurozone as a threat to global financial stability. The IMF called upon the European Central Bank to cut interest rates and made statements that implied that the currency will continue to weaken, and the ECB was too optimistic in keeping rates unchanged. According to Reuters, the IMF also declared that banks in the region would offload nearly $2.8 trillion in assets within the next two years to mitigate risk exposure. This prediction is $200 billion higher than the original estimate made six months ago. The Global Financial Stability Report released by the IMF on Wednesday gave investors little confidence in the currency, as it described the eurozone as heading toward “a downward spiral of capital flight, break up fears, and economic decline." Problems in Spain and Greece remain at the forefront of the euro crisis, with Spain's bailout request still hanging above the region's head. Thus far, Spanish Prime Minister Mariano Rajoy has shown no signs of requesting aid and taking advantage of the ECB's bond buying program. Both countries have seen weeks of protests, highlighting social unrest in the region. The region has made progress over the past months by implementing new policies in struggling economies and setting out to institute a common bank supervisor. However, some are doubtful this will be enough. Trouble in Greece with meeting their bailout terms seems to foreshadow difficulty getting struggling economies to stick to their reforms.