Eurozone economies are in critical danger and in dire need of expansive quantitative easing measures from the ECB, according to an International Monetary Fund (IMF) staff report.
In the report, entitled "Article IV", the IMF demanded the European Central Bank lower borrowing rates and deploy further "unconventional measures" to relieve market stress.
"Buying a representative portfolio of long-term government bonds - for example, defined equitably across the euro area by GDP weights - would also provide a measure of added stability to stressed sovereign markets," the IMF said.
The body criticised recent attempts to stabilise the region's economy and banks as a failure, arguing a more determined approach towards a complete banking and fiscal union was needed.
The IMF urged eurozone officials to establish a banking union and move towards fiscal integration as a first priority. Such a union would include a European-wide deposit guarantee scheme, with an ECB credit line for emergencies, and more regulatory power for the central bank.
The report gave detailed recommendations to the ECB, calling on it to cut interest rates further - it cut the headline rate by 25 basis points to 0.75% earlier this month - and embark on a QE programme that should involve "sizeable sovereign bond purchases."
The IMF forecasts a 0.3% contraction in the eurozone economy this year, followed by 0.7% growth next year.
The body's call for a banking union could upset German policy makers, who strongly oppose the idea of a fiscal union and the idea that the ECB should become a lender of last resort.
Two global vehicles
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Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till