A government debt crisis that has engulfed the eurozone should serve as a "wake-up call" for European governments to keep a more watchful eye on their budgets, the International Monetary Fund (IMF) said today. The IMF, which together with the European Union has offered a 750- billion-euro rescue package to avoid governments defaulting, called for structural reforms that could more permanently restore market confidence in the 16-member currency zone, dpa reported. The IMF praised European leaders for quickly responding to the crisis by implementing the major bailout package, which has gone some way to restoring investors' confidence. But "underlying problems" with how Europe monitors its economies had yet to be resolved. "The current crisis is a wake-up call for the euro area," the IMF said in annual review of the bloc's economy. The crisis "has put a spotlight on the deficiency of area-wide mechanisms in disciplining fiscal and structural policies." Europe's woes began in Greece, but concerns have since spread to other heavily indebted economies in the eurozone. Market confidence was helped somewhat this week after Ireland, Spain and Greece managed to launch new rounds of government debt offerings. Germany and France in particular have been pushing for much stronger punishments in future for states unable to keep their fiscal house in order. The eurozone has a budget deficit limit of 3 per cent of gross domestic product, but this is rarely enforced. The IMF said full confidence from the markets would "take time to restore" and would be aided by labour and productivity reforms that could help the EU grow faster over the long term.
