Tuesday

7th Jul 2020

IMF urges 'strong collective action' by EU

  • Christine Lagarde. The IMF says that "without more decisive actions to boost growth and strengthen integration, the euro area may be subject to instability and repeated crises of confidence". (Photo: Council of the EU)

The International Monetary Fund has said that political divisions between Europeans make the eurozone more vulnerable.

The eurozone is increasingly divided and vulnerable to risks at a time when medium term outlook is weak, the International Monetary Fund (IMF) has warned, calling for "strong collective action".

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"The euro area is at a critical juncture," it said in its annual review of the eurozone's economy published on Thursday (16 June).

"Growing political divisions and euroscepticism have weakened prospects for collective action, leaving the euro area increasingly vulnerable to a number of risks at a time when there is little policy space," it noted.

The fund said that "the lack of a collective response to the refugee surge has vividly exposed political fault lines". "If border controls persist, or refugee inflows pick up again, these divisions could deepen, jeopardizing free movement within the single market", it added.

It also said that a British vote to leave the EU on 23 June, "or even a close result in favor of remaining, could exacerbate these tensions, contributing to further Euroscepticism and uncertainty".

The IMF called for "strong collective actions … to allay euroscepticism and renew faith in the monetary union".

"Without more decisive actions to boost growth and strengthen integration, the euro area may be subject to instability and repeated crises of confidence," it said.

Speaking in Luxembourg after a Eurgroup meeting, the IMF director Christine Lagarde suggested that EU countries put money "in a common pot for projects and certain operations".

She said the pot could be "a top-up to the Juncker plan", a €315-billion investment plan launched by the European Commission in 2014, "or a whole new budgetary pot".

The common resources would be used to deal with the migrant and refugee issue or for "an energy policy based on better pooling of effort to combat climate change," she said. 


The condition for that pooling of resources would be that all countries respect EU budgetary rules and carry out structural reforms.

Using opportunities

"Structural reforms remain high on our agenda," Eurogroup president Jeroen Dijsselbloem said after the meeting.

He said that eurozone finance ministers "concurred with IMF that we need to make our economies more resilient".

He said the eurozone should use "the opportunities that we have at the moment", like low interest rates.

He said it should also "reduce deficits and debts, work on the banking union and make its economies more flexible, to help them adjust faster".

He did not mention the IMF's idea for a common pot for projects, a controversial proposal for some countries, especially Germany.

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