Page last updated at 14:32 GMT, Tuesday, 21 October 2008 15:32 UK

Sarkozy wants top EU economy team

French President Nicolas Sarkozy in European Parliament, 21 Oct 08
Mr Sarkozy is steering the EU presidency until January

French President Nicolas Sarkozy has called for a European "economic government" to ensure a more united EU response to financial turmoil.

The leaders of the 15-nation eurozone should co-ordinate their actions with the European Central Bank, he said.

Meanwhile the International Monetary Fund (IMF) said Europe should weather the worst of the turmoil thanks to the EU's "crisis management" measures.

However, the IMF predicts eurozone growth will slow to 0.2% next year.

That compares with a predicted rate of 1.3% this year and 1.4% in 2010.

In its latest assessment, the IMF forecasts that the Irish Republic and Italy will prove to be in recession already, with growth figures for 2008 of -1.8% and -0.1% respectively.

Both would remain in recession next year, with Spain joining them.

More promisingly, the IMF believes eurozone inflation will fall to 1.9% next year, down from 3.5% this year.

Alessandro Leipold, acting head of the IMF's European Department, said that should allow a further easing of interest rates.

'Bold steps needed'

The 15 countries that use the euro agreed on a massive bail-out package earlier this month to help banks survive the crisis, which has seen inter-bank lending dry up, threatening the wider economy.

"Even though the global financial crisis will cause a sharp deceleration of economic activity, the comprehensive crisis management actions being undertaken should allow Europe to avoid a worse outcome," said Mr Leipold.

He warned, however, that European governments must "follow up with bold steps on their recent commitments".

Mr Sarkozy, meanwhile, lamented that "we don't have an economic government worthy of that name".

"It's not possible for the eurozone to continue without clearly identified economic governance," he told the European Parliament on Tuesday.

Mr Sarkozy is preparing for a global summit on the bank crisis in November.

He is in charge of the six-month EU presidency until January, when France hands over to the Czech Republic.

In his parliament speech, he also highlighted the economic cost of implementing the EU's greenhouse gas emission targets - a cost that many international competitors do not face.

He referred to the US Congress approval last month of $25bn in low-interest loans for carmakers, and asked MEPs: "Can we leave the European car industry in a situation of grave distortion of competition, in relation to US carmakers?"

"Europe needs a single response, it cannot be naive in relation to other parts of the world," he said.

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