Wednesday

26th Apr 2017

IMF tells eurozone to turn on printing presses

  • "There is room for monetary policy in the euro area to ease further" (Photo: Tabbo107)

The euro crisis continues to weigh down the global economy, the International Monetary Fund said Monday (16 July), putting pressure on the European Central Bank to lower its interest rate even further and issue more cheap loans to the banks.

"There is room for monetary policy in the euro area to ease further. In addition, the ECB should ensure that its monetary support is transmitted effectively across the region and should continue to provide ample liquidity support to banks under sufficiently lenient conditions," the IMF said in its annual World Economic Outlook.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The Washington-based finance outfit cut its global economic growth forecast to 3.9 percent from 4.1 percent in April, mainly due to the continued stress in the eurozone and weaker-than-expected economic activity in emerging countries.

"The utmost priority is to resolve the crisis in the euro area," the IMF said. Overall, the 17 euro countries will contract by 0.3 percent this year and return to a 0.7 percent growth rate next year, the IMF predicts.

The specific reference to the ECB is meant to increase pressure for the Frankfurt-based body to turn on the printing presses via cheap loans, low interest rates and "some form of quantitative easing", meaning direct or indirect bond purchasing aimed at lowering governments' borrowing costs.

The ECB last year bought some Italian and Spanish bonds on the so-called secondary markets where they are traded after being purchased from governments (primary markets). But so far, ECB chief Mario Draghi has ruled out a resumption of this programme.

"What we can expect at the moment is another interest rate cut in September and possibly a further easing of collateral rules for banks (when they seek ECB loans)," ING economist Carsten Brzeski told this website. He said it was not unusual for the IMF to come up with "provocative" ideas which stem from a different central bank culture. Unlike the US Federal Reserve, the ECB is prohibited from buying bonds directly from governments.

German delay

The IMF report praised euro-leaders for their "step in the right direction" at a 28 June summit where they agreed to create a single supervision for eurozone banks and to recapitalise troubled banks directly from the bailout funds, rather than going through governments' balance sheets.

But the German constitutional court has meanwhile announced it will wait until 12 September before ruling on the constitutionality of the new eurozone bailout fund, the European Stability Mechanism, and on the treaty on fiscal discipline signed by 25 EU states. The ESM should have come into being on 9 July, with senior politicians, including from Germany, having warned the court of the potential consequences of a delayed vote.

Delayed or insufficient policy action - a possible reference to the ESM stalemate - is the biggest risk to the global recovery and could further escalate the euro crisis, the IMF said.

“Simply put, the euro periphery countries have to succeed,” IMF chief economist Olivier Blanchard said when presenting the report.

Barroso condemns British "delight" at euro crisis

European Commission President Jose Barroso Tuesday launched an angry attack on British Conservative's in the European Parliament, accusing them of "taking delight" in the eurozone debt crisis.

Eurogroup makes 'progress' on Greek deal

Eurozone ministers endorsed an agreement in principle between the Greek government and its creditors over a new package of reforms. But talks on fiscal targets and debt could still block a final agreement.

New anti-trust complaint looms over Microsoft

At least three security software companies “met several times” with the European Commission to complain about Microsoft’s alleged abuse of its market position. A formal case could follow.

Commission stops German-British stock merger

The decision to block the merger of the London Stock Exchange and Deutsche Boerse was expected, as negotiations between the parties broke down a few weeks ago.

New anti-trust complaint looms over Microsoft

At least three security software companies “met several times” with the European Commission to complain about Microsoft’s alleged abuse of its market position. A formal case could follow.

Investigation

MEPs oppose EU agency to prevent Dieselgate II

The European Parliament said on Tuesday that there should be more EU oversight on how cars are approved, but stopped short of calling for an independent EU agency.

News in Brief

  1. Council of Europe puts Turkey on watch list
  2. EU to put parental leave on political agenda
  3. Israel cancels German meeting over human rights groups
  4. Hungary's Orban will participate in EU parliament debate
  5. Malta floats cash-for-refugees plan
  6. Ivanka Trump to meet Merkel at Berlin women's conference
  7. Arctic Ocean could be ice-free in 20 years
  8. Nord Stream 2 to get €4.8bn from European energy firms

Stakeholders' Highlights

  1. UNICEFRace Against Time to Save Millions of Lives in Yemen
  2. Nordic Council of MinistersDeveloping Independent Russian-Language Media in the Baltic Countries
  3. Swedish EnterprisesReform of the European Electricity Market: Lessons from the Nordics, Brussels 2 May
  4. Malta EU 2017Green Light Given for New EU Regulation to Bolster External Border Checks
  5. Counter BalanceCall for EU Commission to Withdraw Support of Trans-Adriatic Pipeline
  6. ACCAEconomic Confidence at Highest Since 2015
  7. European Federation of Allergy and Airways60%-90% of Your Life Is Spent Indoors. How Does Poor Indoor Air Quality Affect You?
  8. European Gaming and Betting AssociationCJEU Confirms Obligation for a Transparent Licensing Process
  9. Nordic Council of MinistersNordic Region and the US: A Time of Warlike Rhetoric and Militarisation?
  10. European Free AllianceEFA MEPs Vote in Favor of European Parliament's Brexit Mandate
  11. Mission of China to the EUXinhua Insight: China to Open up Like Never Before
  12. World VisionViolence Becomes New Normal for Syrian Children

Latest News

  1. European states still top media freedom list
  2. Let’s not put European public health at risk
  3. Threatened Budapest university calls for EU support
  4. Orban set to face down EU threats
  5. Dont expect 'quick fix' in Syria, China tells EU
  6. Russische schwarze Kassen bedrohen EU Demokratie
  7. Libya commanders in Brussels for migration talks
  8. Mixed review for EU asylum spots in Greece and Italy