Euro Economy Needs 'Comprehensive' Plan: IMF Official

Reported by Stephane Pedrazzi, Written by Ted Kemp,

The risk of recession still lingers over the euro zone, but the region's policymakers are likely to introduce a package this month that's comprehensive enough to head off that scenario, according to an official at the International Monetary Fund.

John Lipsky
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"There certainly are downside risks," to the economy, John Lipsky, the IMF's first deputy managing director, told CNBC. However, "we're looking forward to the October 23 European leaders' agreement on a comprehensive package to deal with Europe's financial and economic issues."

Such a plan of action would include the creation of "firewalls" that would protect nations that aren't facing immediate problems but whose markets have taken a hit from recent strains in some parts of the euro zone. It would also include the recapitalization of banks to ensure that they can lend and foster economic growth.

The package must also include measures to deal with the immediate problems facing Greece, which is mired in an ongoing—some believe worsening—struggle to pay its bond debts. Lipsky anticipates IMF approval for another tranche of assistance for Greece, though he insisted that the Greek question must be viewed as one component of a larger package for the euro zone as a whole.

"What's important is there's a commitment at the leaders' level to a comprehensive package," Lipsky said.

In September, the IMF lowered its 2011 economic growth forecast for the 17-nation euro zone by almost half a percentage point, to 1.6 percent. It sees 2012 growth for the single currency region of only 1.1 percent.