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IMF warns Luxembourg of possible eurozone ‘accident’

The IMF voiced a thinly disguised expression of worry over Greece Monday when it warned Luxembourg of the possibility of a “political accident” in the eurozone that could spark a region-wide crisis.

In a review of Luxembourg’s economy, the International Monetary Fund said the small country was vulnerable economically and financially to an intensification of the euro-area crisis.

“Moreover, a political accident in the euro area could trigger a financial crisis engulfing the region,” the IMF said.

The review did not define the possible source of the accident, but the comment came as Athens remained locked in a political stalemate over an EU-IMF bailout which has sent stock markets and the euro tumbling again.

The IMF has steadfastly refused to comment on Greek politics since May 6 elections left the parliament deeply divided and rival parties so far unable to establish any coalition government.

Also on hold are any new disbursements of IMF bailout funds, crucial to keep the country financially stable to avoid a debt default and, many speculate, a possible withdrawal from the euro that would shake the entire single-currency area.

The IMF told Luxembourg its banks had substantial risk exposure to the region, and that if the region’s crisis intesnifies it could also push unemployment higher.

But, the IMF added optimistically, “a better-than-expected outlook could materialize if efforts to address the euro area sovereign debt crisis quell market uncertainty and lead to a quicker euro-area recovery.”