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WRAPUP 1-Europe uneasy in IMF spotlight as Tokyo meetings start

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By Lesley Wroughton and Anna Yukhananov

TOKYO, Oct 12 (Reuters) - Greece, Spain and the euro zone'sslow progress toward debt reform take centre stage at IMFmeetings on Friday despite Europe's best effort to remove itselffrom the spotlight.

The International Monetary Fund recommended that some ofEurope's debt-burdened countries take a bit more time to reducebudget deficits, arguing that moving too fast iscounter-productive because it hurts the economy.

But Germany, Europe's largest creditor country and the keyto any lasting fiscal reforms, pushed back against that adviceand said reversing course on promised deficit reductions wouldonly weaken credibility.

"The euro zone does not lack the financial wherewithal tostem the crisis. What it lacks is the political will," formerIMF official Eswar Prasad, a senior fellow at the BrookingsInstitution in Washington, wrote in the International HeraldTribune.

While the IMF has advocated a slower approach to debtreduction, it urged swifter policy action, both in Europe andthe United States, to remove economic uncertainty and help liftanaemic global economic growth.

"We expect action, courageous and cooperative action on thepart of our members," IMF Managing Director Christine Lagardesaid, spelling out her expectations for the twice-yearlymeetings that start on Friday.

In Europe, the IMF wants to see more progress towardpromised reforms that would create a tighter fiscal and bankingunion. In the United States, the IMF has sounded the alarm overthe "fiscal cliff" of automatic spending cuts and tax increasesthat take effect early next year unless Congress acts.

European officials insist they are on track to deliverreforms, and want to see closer scrutiny of the U.S. fiscalissues instead. U.S. Treasury Secretary Timothy Geithner saidWashington has a window of opportunity to address the fiscalcliff after the Nov. 6 presidential election.

Both topics will be on the agenda, along with the IMF's owninternal reform efforts, which have stalled.

The Fund was supposed to have completed by the Tokyomeetings a set of voting reforms that would give fast-growingemerging markets greater say in the international lender andvault China to the No. 3 spot.

But U.S. presidential politics got in the way. The Obamaadministration is reluctant to seek congressional approval foradditional IMF funding when the budget deficit is such ahot-button election issue. Without U.S. support, the IMF reformslack sufficient votes to pass.

(Additional reporting by Reuters IMF team; Writing by EmilyKaiser; Editing by Tim Ahmann)

((emily.kaiser@thomsonreuters.com)(+65 6318 4763)(ReutersMessaging: emily.kaiser.reuters.com@reuters.net))

Keywords: IMF ECONOMY/