With renewed turbulence in financial markets putting policymakers in the euro area under pressure to agree new measures to stem the crisis in the periphery, the IMF is calling for a concerted strategy to lift growth in Europe.
An effective strategy would be based on macro-economic policies to support demand in the near term, and further progress in structural reforms to raise long-term growth and complete the process of European integration.
“Overall, fiscal adjustment plans for this year are broadly appropriate in Europe. In a few euro area countries, however, the nominal fiscal targets for 2013 agreed before the current slowdown in growth may prove too procyclical and may need to be adjusted or at least expressed in structural terms”, Deputy Managing Director, Nemat Shafik, said at the 2012 Brussels Economic Forum. With price pressures expected to decline, the European Central Bank could also consider further expansionary measures, Shafik said.
Over the medium term, countries will need to reform their labour and product markets and find new ways to encourage investment to raise the growth potential of their economies and improve competitiveness. “Unfortunately, there is no magic bullet to spur growth and job creation. Crisis-hit countries in Europe will only be able to revitalise their economies by selling more goods abroad and creating new jobs in the private sector”, she said.
At the regional level, European leaders should aim to complete the architecture of monetary union. In particular, a banking union that would include a bank deposit guarantee and a bank resolution framework with adequate common backstops, and common supervision and regulation, would be a welcome step, she said.
Press release
© International Monetary Fund
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article