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Israel’s Fischer Urges Europe to Take Banking Problems Seriously

Bank of Israel Governor Stanley Fischer said Europe remains the weak link in the global economy and European Union officials need to tackle the continent’s banking problems.

Europe “is up and down and still the weakest part of the global economy,” Fischer said in an interview with Bloomberg Television today. Europe has to ”really take their banking- sector problems seriously.”

The International Monetary Fund trimmed its global growth forecast this week and urged European policy makers to use “aggressive” monetary policy as a second year of contraction leaves the euro area’s recovery lagging behind the rest of the world.

The global economy will expand 3.3 percent this year, less than the 3.5 percent forecast in January, after 3.2 percent growth in 2012, the Washington-based fund said April 16, cutting its prediction for this year a fourth consecutive time.

The euro area still faces a contraction of credit as banks fail to translate the European Central Bank’s low interest rates into affordable credit for companies and households. IMF Managing Director Christine Lagarde said ECB policy is “spinning its wheels” and called for a recapitalized and restructuring banking system.

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