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IMF: $650 billion isn't enough for the European bailout fund

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The backdrop to the current argument is the ongoing debate about the priorities in solving the euro debt crisis. Germany insists on budgetary discipline as the main tool. Before Ms. Merkel commits to spending more money on bailing out ailing economies, she wants to see implementation of the fiscal union she pushed through at the last EU summit in December that would give Brussels more control over individual countries' budgets. By March, member states are supposed to have ratified the union, subscribing to the German idea of austerity. 

Critics of Merkel’s position say that thrift is not the answer, nor does Europe have time until March. Mrs. Lagarde, who on Sunday met with Merkel and Finance Minister Wolfgang Schäuble, was clearly not satisfied by the outcome of that meeting.

"The longer we wait, the worse it will get,” Lagarde said in her speech on Monday. "We must all understand that this is a defining moment. It is not about saving any one country or region. It is about saving the world from a downward economic spiral."

The IMF warned on Tuesday that the euro area would fall into a "mild recession" this year. The eurozone's economy is expected to shrink by .5 percent, according to the IMF's revised forecast released today. 

Lagarde appealed to Germany to fulfill its leadership role. She urged the chancellor to accept financial risk-sharing in the eurozone – possibly in the shape of so-called eurobonds – and an increased engagement of the European Central Bank (ECB) to provide capital to indebted economies as well as to private banks.

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