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IMF: Euro countries must act now to save banks

New report warns that to overcome crisis, the efforts to strengthen banks must accelerate.

The eurozone debt crisis could spread across the region if European countries do not take greater steps to fix the problems in their financial sectors, the International Monetary Fund's latest report warns.

Whilst predicting similar growth for 2011/12 as seen in the last year, the IMF said that the debt crisis in Ireland, Greece and Portugal could spread unless European countries step up efforts to fix the banks.

The IMF's Outlook for Europe economic survey estimates eurozone growth of 1.7 per cent this year and 1.9 per cent the next. It adds, however, that this outlook depends on restoring confidence in euro banks and continued bank lending.

Despite the debt rescue packages in place -- including a new aid deliver of €78bn from Finland to Portugal -- the report said that "downside risks to the outlook dominate."

The IMF continued in highlighting the need to carry out stress tests and follow-up programmes on banks, saying: "Financial linkages between countries with sovereign debt troubles and the rest of Europe could potentially pose more risk to the outlook. Restoring fiscal health, squarely addressing weak banks, the implementing structural reforms to restore competitiveness are key."

The report called some recovery "solid", particularly in eastern euro countries, but that otherwise stability was uneven. The UK, it warned, faces "considerable short-term uncertainty, as growth turned flat in late 2010 - taking out temporary weather-related effects - and fiscal consolidation accelerates."

Alice Gribbin is a Teaching-Writing Fellow at the Iowa Writers' Workshop. She was formerly the editorial assistant at the New Statesman.

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Geoffrey Howe dies, aged 88

Howe was Margaret Thatcher's longest serving Cabinet minister – and the man credited with precipitating her downfall.

The former Conservative chancellor Lord Howe, a key figure in the Thatcher government, has died of a suspected heart attack, his family has said. He was 88.

Geoffrey Howe was the longest-serving member of Margaret Thatcher's Cabinet, playing a key role in both her government and her downfall. Born in Port Talbot in 1926, he began his career as a lawyer, and was first elected to parliament in 1964, but lost his seat just 18 months later.

Returning as MP for Reigate in the Conservative election victory of 1970, he served in the government of Edward Heath, first as Solicitor General for England & Wales, then as a Minister of State for Trade. When Margaret Thatcher became opposition leader in 1975, she named Howe as her shadow chancellor.

He retained this brief when the party returned to government in 1979. In the controversial budget of 1981, he outlined a radical monetarist programme, abandoning then-mainstream economic thinking by attempting to rapidly tackle the deficit at a time of recession and unemployment. Following the 1983 election, he was appointed as foreign secretary, in which post he negotiated the return of Hong Kong to China.

In 1989, Thatcher demoted Howe to the position of leader of the house and deputy prime minister. And on 1 November 1990, following disagreements over Britain's relationship with Europe, he resigned from the Cabinet altogether. 

Twelve days later, in a powerful speech explaining his resignation, he attacked the prime minister's attitude to Brussels, and called on his former colleagues to "consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long".

Labour Chancellor Denis Healey once described an attack from Howe as "like being savaged by a dead sheep" - but his resignation speech is widely credited for triggering the process that led to Thatcher's downfall. Nine days later, her premiership was over.

Howe retired from the Commons in 1992, and was made a life peer as Baron Howe of Aberavon. He later said that his resignation speech "was not intended as a challenge, it was intended as a way of summarising the importance of Europe". 

Nonetheless, he added: "I am sure that, without [Thatcher's] resignation, we would not have won the 1992 election... If there had been a Labour government from 1992 onwards, New Labour would never have been born."

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.