Sunday

20th Jan 2019

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."

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

"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 bleeding untold billions to fraud

Over €6bn of EU taxpayers' money was stolen by criminals in recent years and over €130m is still being lost each year, EU auditors said.

ECB takes over ailing Italian bank

Decades of mismanagement appear to have caught up with Italy's Carige bank as the European Central Bank takes control in a move to stave off another banking crisis.

Analysis

China's 2019 growth outlook

As China's growth seems to be slowing, some observers see the country amid what the New York Times called a "severe downturn". As they mistake China's secular deceleration with cyclical fluctuations, they miss the rapid increase in Chinese living standards.

News in Brief

  1. EU trade commissioner asks for green light for US talks
  2. Slovakia's commissioner takes unpaid leave to run for presidency
  3. Minority elects Lofven as prime minister of Sweden
  4. Putin opposes EU prospects of Serbia and Kosovo
  5. Tsipras launches campaign to ratify Macedonia deal
  6. US-EU meeting in doubt after Trump cancels plane
  7. Germany and China to sign pact on finance cooperation
  8. Labour divided on second Brexit vote plan

Stakeholders' Highlights

  1. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  2. Nordic Council of MinistersSeminar on disability and user involvement
  3. Nordic Council of MinistersInternational appetite for Nordic food policies
  4. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  5. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  6. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  7. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  8. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  9. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  10. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  11. Nordic Council of MinistersThe Nordic gender effect goes international
  12. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General

Latest News

  1. Aachen treaty and Brexit endgame This WEEK
  2. Germany led way on EU rights protection
  3. How to troll the European Parliament elections
  4. MEPs in Strasbourg: everywhere but the plenary
  5. Brexit delay 'reasonable', as May tries cross-party talks
  6. MEPs allow Draghi's membership of secretive bank group
  7. EU parliament backs Morocco deal despite row
  8. Barnier open to 'future relations' talks if UK red lines shift

Join EUobserver

Support quality EU news

Join us