Friday

24th Feb 2017

IMF warns Europe of falling behind US on recovery

  • Paris: France's gloomy outlook is weighing on Europe (Photo: Moyan Brenn)

Europe is falling behind the US in emerging from the economic crisis, with sluggish growth in Germany and recession in France worsening the outlook for eurozone periphery countries, the International Monetary Fund (IMF) has said.

"Recent good news about the US has come with renewed worries about the euro area. Given the strong interconnections between countries, an uneven recovery is also a dangerous one," Olivier Blanchard, IMF chief economist said Tuesday (16 April) when presenting the 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 IMF forecasts growth in the US to be at 1.9 percent this year and 3 percent in 2014, while the eurozone economy will contract by 0.3 percent this year and grow by only 1.1 percent in 2014.

But apart from the known troubles in Italy and Spain, where the economy is set to shrink "substantially" this year, Blanchard flagged up "weaknesses in the core," a reference to Germany and France.

Germany's growth is forecast to be only 0.6 percent this year, while France will have a "slightly negative forecast, reflecting a combination of fiscal consolidation, poor export performance, and increasingly so, low confidence."

"Low growth in the euro core is bad news not only on its own, but is clearly bad news for euro periphery countries which depends very much on the core," Blanchard noted.

Meanwhile, "institutional progress" in the eurozone, such as steps to create a so-called banking union and help from the European Central Bank" is not enough."

"The interest rates facing borrowers in periphery countries are still too high to secure the recovery, and there is a need for further and urgent measures to strengthen banks without weakening the sovereigns," Blanchard added.

That sense of urgency is not felt in Berlin, where the finance minister recently said a change in the EU treaties would be needed to set up institutions dealing with the bankruptcy of banks without tapping taxpayers' money.

A treaty change usually means years of wrangling and can be vetoed by one member state.

Eurozone recession to continue in 2013

The eurozone economy will shrink by a further 0.3 per cent in 2013, the European Commission has said. The bloc will have to wait until 2014 before seeing economic growth.

News in Brief

  1. Labour ousts Ukip in Brexit homeland
  2. Dutch lower house approves EU-Ukraine treaty
  3. WTO says Russian pork ban was illegal
  4. Belgian nuclear plant made 'significant progress' on safety
  5. Report: Commission gauging EU support for Poland sanctions
  6. Irish PM expected to quit amid police scandal
  7. After Brexit vote, 100,000 UK firms registered in Ireland
  8. Bayrou to support Macron in French presidential election

Stakeholders' Highlights

  1. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  2. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  3. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  4. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  5. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  6. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  7. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  8. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  9. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  10. Centre Maurits CoppietersMinorities and Migrations
  11. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  12. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year

Latest News

  1. Don't blame Trump for Europe's insecurity
  2. EU rules out post-Brexit 'hard border' with Northern Ireland
  3. Fewer EU pupils being taught two foreign languages
  4. Women and child refugees face abuse in French camp
  5. Russian military creates 'information force'
  6. Spain MPs to probe €60bn bank bailouts
  7. Crowded race to win EU medicines agency
  8. Fighting environmental injustice in Europe