Sunday

22nd Jan 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.

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