IMF urges EU to refinance Irish bank bailout so as to avoid another bailout next year

As reported in the Telegraph, the IMF has concluded that the Irish bank bailout needs to be redone as it does not leave the Irish government with the resources needed to avert an economic contraction by pursuing expansionary fiscal policies.

Regular readers know that one of the fatal flaws in the Japanese model for handling a bank solvency led financial crisis is that it uses up scarce government resources needlessly bailing out banks (and banker bonuses) and not on helping the real economy.

A second fatal flaw in the Japanese model is that it does not fix the underlying problem and require banks to recognize all their bad debts.  As a result, the Japanese model requires year after year of bailouts.

The IMF confirmed these flaws in its description of why the Irish bank bailout needs to be redone.

The International Monetary Fund on Friday urged Europe to help Ireland refinance its crippling bank bailout and consider taking equity in state-owned banks to help Dublin return to bond markets and avoid a second bailout next year..... 

The IMF repeated its call for more effort to stimulate growth, warning that significant additional fiscal adjustment in a low growth environment would risk a "pernicious cycle of rising unemployment, higher arrears and loan losses."...

However with weaker exports and a larger than expected decline in consumption weighing on Ireland's economy.