IMF chief calls for ''political clarity'' in Greece, Italy

The head of the International Monetary Fund called Thursday for greater "political clarity" in Greece and Italy, after talks with Chinese leaders dominated by Europe''s worsening debt crisis. Greece and Italy are grappling with domestic political upheaval brought on by the sovereign debt crisis that has engulfed the eurozone, and Christine Lagarde said both countries urgently needed to sort out their leadership difficulties.
"Political clarity is conducive to more stability... it is much needed in Greece, it is much needed in Italy," the IMF chief told journalists in Beijing. Confusion over the future leadership of both countries was "conducive to volatility", added Lagarde, who is on a two-day visit to China.
Her comments came as Greece prepared to unveil a new transitional government to ratify a crucial EU bailout deal and hold early elections after days of bickering between political leaders. Italy''s Prime Minister Silvio Berlusconi has said he will step down once credible economic reforms are in place, after which talks on a new government will start.
Lagarde also said emerging economies had a role to play in resolving the debt woes threatening the global economy, calling on them to allow their currencies to appreciate. "Emerging markets, and large emerging markets in particular, have a role to play either by reengineering their growth model or by letting their currencies appreciate appropriately," she said. China has been accused by Europe, the United States and other trade partners of keeping its currency grossly undervalued, which gives its exporters an unfair advantage.
Asian stock markets slumped on Thursday after Wall Street suffered a pummelling, as Italy became the latest European country to suffer a huge surge in borrowing costs. In talks later Thursday, China''s Premier Wen Jiabao told Lagarde that Europe''s worsening economic crisis was leading to financial instability in developed nations, state media said. But he expressed confidence in Europe''s own efforts to control the turmoil. "The Chinese government supports the measures adopted by the EU, the European Central Bank and the IMF to address the crisis," China Central Television quoted Wen as telling Lagarde.