More Integration and Cooperation Is Way Forward for Europe, IMF Chief Says

But the aftermath of the crisis has also uncovered troubling weaknesses in Europe’s institutional framework. "We must use this crisis as an opportunity to move faster and deeper to strengthen integration," he said.

During his stay in Bucharest, Strauss-Kahn also met with a group of business students at the Academy of Economic Studies. In response to questions, he told his audience how the IMF has changed to help countries cope with the crisis. IMF lending to countries during the crisis reached about $80 billion in funds committed to Europe alone. Working with governments, the IMF has also taken care to protect the most vulnerable groups in society, he said.

Strauss-Kahn praised his hosts for decisive action to combat the crisis. "Romania has taken bold decisions in the wake of the crisis, which came at a high cost to ordinary Romanians but I am convinced the outcome would have been much worse without it," he said.

Three priorities for Europe

As Europe worked to reshape its institutions, Strauss-Kahn pointed to three priorities.

- First, a fundamental overhaul of Europe’s financial architecture is needed, in particular a system for crisis management and resolution of failed cross-border banks. Strauss-Kahn repeated his call, first made in a speech last week in Brussels, for an integrated European framework for crisis prevention, management and resolution. Current national efforts to overhaul financial regulation and supervision make sense, but need to fit together, he said.

- Second, Europe should strengthen its economic policy coordination, and place it in the broader context of the range of policies that matter for growth and economic stability. Currently, the major policy frameworks?economic, financial and structural?are relatively independent of one another. "The crisis has shown you can’t have a common currency without having a more coordinated economic policy," he told parliament.

- Third, Strauss-Kahn stressed the need to reignite growth and tackle unemployment. In the short term, economic policies should support growth and facilitate adjustment. In the long term, improving Europe’s competitiveness will be key, including by tackling rigidities in labor and product markets, he said.

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