IMF wants 'urgent' Spanish reforms
Report calls for swift labour and banking reforms in bid to tackle budget deficit.
Last Modified: 24 May 2010 16:22 GMT
The IMF said Spain must search for more ways to cut its budget deficit [AFP] 

The International Monetary Fund has called on Spain to implement "urgent" labour and banking reforms as the country struggles to rein in its public deficit amid a mounting European debt crisis.

The government introduced a fresh round of austerity measures earlier this month, including cutting civil service salaries by five per cent, in reforms aimed at saving $19bn.

The IMF noted that "ambitious" fiscal consolidation was underway but said that these needed to be "complemented with growth-enhancing structural reforms".

Among Spain's challenges, the organisation cited a "dysfunctional labour market, the deflating property bubble, a large fiscal deficit ... anemic productivity growth, weak competitiveness and a banking sector with pockets of weakness".

Monday's report by the Washington-based fund said consolidation and reform of the banking system needed to be accelerated and also called for the government's proposed pension reforms to be "quickly adopted".

European stock markets and the euro fell in afternoon trading as the continent's debt crisis intensified following this weekend's Spanish bailout of a troubled financial firm.

The rescue of CajaSur, a regional savings bank which has been taken over by the Bank of Spain, could cost up to $3.4bn, a Spanish newspaper reported.

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