Thursday

19th Jan 2017

Rehn rebuffs IMF criticism of austerity measures

  • Lagarde and Rehn - the IMF and the EU do not see eye to eye on austerity any more (Photo: consilium.europa.eu)

Blanket criticism of austerity policy misses the positive effect it has on market confidence, EU economic affairs commissioner has said in the face of negative statements by the International Monetary Fund (IMF).

Referring to a report out last week in which IMF economists said the growth-dampening effects of spending cuts had been underestimated, Olli Rehn at a think-tank event in Brussels on Friday (11 January) said "one cannot draw, on the basis of this study, strong policy conclusions."

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.

"In the political debate, what has often been forgotten is that we have not only the quantifiable effect - which is something that the economist like to emphasize - we also have the confidence effect," he added.

Taking Italy as an example, he asked "what would have happened" if Rome had decided to loosen fiscal policy in November 2011, when technocrat Prime Minister Mario Monti took the reins and started introduced spending cuts?

"From November onwards, we have seen more consistent and prudent fiscal consolidation by Italy and we are seeing much lower bond yield for Italy, which brings savings to Italian tax papyers and facilitates return to economic recovery," Rehn said.

He noted that the European Commission, the IMF and European Central Bank - the so-called troika, which ovesees bailout programmes in Greece, Ireland and Portugal - are in the middle of an "ongoing trialogue" to find "common ground" on the effects of spending cuts on growth.

Rehn's spoke out amid increasing IMF disagreement on EU-imposed austerity on crisis-hit member states - a policy which puts heavy emphasis on slashing spending and increasing privatisation.

An IMF official last spring criticised the pace and depth of the budget cuts demanded from Greece, while Christine Lagarde, who heads the Washington-based institution, late last year said Athens needs more time to get its house in order.

Rehn refused to accept the criticism on austerity, but he acknowledged that "the coming months will see tough times and social tensions," because EU citizens will see improvements in their day-to-day lives "only with some delay."

He urged EU countries not to "lapse into complacency."

He also highlighted his native Finland and France as registering "worrying losses" in their shares in global markets.

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey

Latest News

  1. 'Be patient,' ECB chief tells Germany
  2. EU cannot copy Australia's offshore asylum model
  3. Brexit men launch anti-EU website
  4. Germany details its 'Marshall Plan' for Africa
  5. IMF predicts 'pain' for UK, as banks prepare London exit
  6. EP deal could help Tusk keep Council job
  7. UN struggles to monitor fate of readmitted Syrians in Turkey
  8. European space chief: Moon village is 'more or less a fact'