Euro has a solid future: IMF chief

Managing Director of the International Monetary Fund Christine Lagarde attends a dialogue meeting during the annual Boao Forum in Boao, in southern China's Hainan province.
(AP Photo/Alexander F. Yuan)

BOAO, China: International Monetary Fund (IMF) chief Christine Lagarde on Sunday told an audience in China that the euro has a solid future and that she hopes no more countries in Europe will need bailouts.

"I think the collective political will.... to maintain, defend, protect and enhance the monetary zone and currency zone has been largely underestimated," Lagarde said.

"The euro has a future and has a long-standing one."

The former French finance minister spoke during a question-and-answer session that followed an address she gave at the Boao Forum for Asia, an annual conference of political and economic leaders held on the Chinese island of Hainan.

Her appearance prompted questions from audience participants about the situation in Cyprus, where the Mediterranean country struck a 10-billion-euro ($13 billion) bailout deal with the EU, the European Central Bank (ECB) and the International Monetary Fund -- the so-called troika.

Europe has struggled with financial crises and the troubles besetting Cyprus are the latest in a series of sovereign debt crises and bailouts -- most notably in Greece -- that have shaken global confidence.

Such concerns were highlighted Friday when a US Treasury official said uncertainty surrounding Europe's financial woes "remains a risk to our recovery and the global economic outlook".

The official spoke on condition of anonymity ahead of Treasury Secretary Jacob Lew's upcoming visit to the EU.

Asked specifically about the prospect for further crises, Lagarde said: "I don't have a crystal ball.

"My dearest hope is that there is not yet another country down the line that needs to be repaired and that could require support from both the European partners and the IMF."

She added, however,that Cyprus represented a unique case and reminded her audience that the country's economy amounted to a mere 0.2 per cent of Europe's economy.

"I don't mean to be derogatory about this country," she said, noting its status as a member of Europe and of the IMF.

"But it was a very specific case in many respects," she added, citing factors such as the the size of the banking sector relative to the Cyprus economy.

Lagarde also said she hoped European authorities would learn from experiences over the past couple of years and "decide to accelerate the consolidation of their currency zone".