Posted on March 4, 2014 by iMFdirect
By Reza Moghadam, Ranjit Teja, and Pelin Berkmen
Recent talk about deflation in the euro area has evoked two kinds of reactions. On one side are those who worry about the associated prospect of prolonged recession. On the other are those who see the risk as overblown. This blog and the video below sift through both sides of the debate to argue the following:
- Although inflation—headline and core—has fallen and stayed well below the ECB’s 2% price stability mandate, so far there is no sign of classic deflation, i.e., of widespread, self-feeding, price declines.
- But even ultra low inflation—let us call it “lowflation”—can be problematic for the euro area as a whole and for financially stressed countries, where it implies higher real debt stocks and real interest rates, less relative price adjustment, and greater unemployment.
- Along with Japan’s experience, which saw deflation worm itself into the system, this argues for a more pre-emptive approach by the ECB.
Filed under: Economic research, Europe, Financial Crisis, growth, IMF, International Monetary Fund | Tagged: competitiveness, deflation, euro area, Europe, inflation, Japan, Spain, unemployment | 1 Comment »
Posted on February 27, 2014 by iMFdirect
By Reza Moghadam
Is the recovery everyone has been waiting for finally here? Encouraging signs from Europe—rising share prices, lower sovereign bond yields, and increased risk appetite—reflect an upturn in high-frequency indicators, the first signs of positive domestic demand in the euro area, and the prospect of less drag from fiscal consolidation.
At the same time, there are formidable headwinds to overcome. Debt owed by households and businesses remains high, making a rapid pick-up in consumption and investment unlikely. Contracting bank lending, as well as relatively tougher credit conditions in the countries most in need of support, are also holding back recovery. And reducing unacceptably high levels of unemployment depends on strong growth.
Filed under: Economic research, Employment, Europe, Financial Crisis, International Monetary Fund | Tagged: book launch, euro area, recovery, unemployment, video | Leave a comment »
Posted on January 28, 2014 by iMFdirect
By Christine Lagarde
(Version in Français and Español)
As we begin the new year, Europe confronts both good and bad news. First the good news. Growth is finally picking up in the euro area as it is slowly emerging from the deep recession. The bad news? Still nearly 20 million people are unemployed. Until the effects on employment have been reversed, we cannot say that the crisis is over.
Two trends are particularly troubling, now and for the future. First, the high level of long-term unemployment gives me great cause for concern: almost half of those without a job have been unemployed for more than a year. Second, I still worry about the large number of young people without jobs: nearly one quarter of Europeans under the age of 25 who are looking for a job cannot find one. In Italy and Portugal, more than one third of under-25s are unemployed, and in Spain and Greece more than one half are.
Filed under: Advanced Economies, Economic research, Employment, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: book launch, Christine Lagarde, Czech Republic, euro area, Europe, Germany, labor market, Slovakia, Spain, unemployment | Leave a comment »
Posted on October 11, 2013 by iMFdirect
By Nemat Shafik
Europe faces a stark choice: risk stagnation or pursue integration. It can continue to muddle through, and hope that growth in the world economy will eventually pick up enough steam to pull its economy out of the doldrums. Or it can make a decisive push to revitalize its economy and complete the reforms needed to achieve a fully integrated economic and monetary union
Five years into the crisis, recovery in the euro area remains fragile. Important actions at both the national and euro-wide levels have tackled the immediate threats to the single currency. These include the European Central Bank’s announcement in 2012 that it stands ready to undertake outright monetary transactions in secondary sovereign bond markets, the completion of the European Stability Mechanism, which created a financial firewall around the euro area, and efforts to restore the health of public finances and implement structural reforms.
Filed under: Advanced Economies, Economic Crisis, Employment, Europe, Finance, Fiscal policy, growth, International Monetary Fund | Tagged: banking union, euro area, Europe, iMFdirect, Nemat Shafik, public finances, structural reforms | Leave a comment »
Posted on October 9, 2013 by iMFdirect
By José Viñals
(Versions in 中文, Français, 日本語, Русский, and Español)
The global financial system faces several major transitions along the road to greater financial stability. These transitions will be challenging because they are accompanied by substantial risks.
So what are these transitions?
- The first one is the transition in the United States from a prolonged period of monetary accommodation towards a normalization of monetary conditions. Will this transition be smooth or bumpy?
- Second, emerging markets face a transition to more volatile external conditions and higher risk premiums. What needs to be done to keep emerging markets resilient?
- Third, the euro area is moving to a stronger union and stronger financial systems. This report focuses on the close links between the corporate and banking sectors. What are the implications of the corporate debt overhang for bank health?
- Fourth, Japan is moving towards the new policy regime of Abenomics. The stakes are high. Will Japan’s policies be comprehensive enough to ensure stability?
- And finally, there is the global transition to a safer financial system, where much remains to be done.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, growth, International Monetary Fund, Low-income countries, Public debt | Tagged: banking, emerging market, euro area, financial regulatory reform, GFSR, Global Financial Stability Report, Japan, José Viñals, monetary policy, United States | Leave a comment »
Posted on October 2, 2013 by iMFdirect
By Erik Oppers
What’s up with weak credit? Five years into the economic crisis credit is still barely growing, and even declining in many advanced economies. Weak credit growth is a major factor holding back the economic recovery and governments have tried every policy they can come up with to jumpstart credit. Still, banks don’t seem to want to lend. Or is it the corporate sector and households that can’t afford to borrow? Many feel these policies are not working. What are policymakers to do?
Our analysis in the most recent Global Financial Stability Report tries to shed light on all this darkness to help countries figure out how to make these policies work. It turns out there is no cookie-cutter solution: the problem differs from country to country and changes over time. For example, in a number of euro area countries, a lackluster demand for loans limited credit growth early in the crisis, but then banks became reluctant to supply more loans as the crisis in Europe intensified in 2012.
Filed under: Advanced Economies, Economic Crisis, Economic research, Emerging Markets, Finance, Financial sector supervision, Fiscal policy, growth, International Monetary Fund, Politics | Tagged: balance sheets, banks, credit, euro area, financial stability, GFSR, Global Financial Stability Report, lending | Leave a comment »
Posted on April 17, 2013 by iMFdirect
By José Viñals
(Versions in عربي ,日本語, Español)
Policymakers’ decisive actions since our last report in October have increased global financial stability by reducing acute risks.
- In the euro area, policymakers averted a financial cliff.
- In the United States, the worst fears of the fiscal cliff had been averted, while balance sheet repair and continued monetary easing have supported financial markets and the recovery.
- In Japan, new policy initiatives have caught the imagination of global markets that Japan may finally leave its deflation valley.
But our latest Global Financial Stability Report concludes that improved financial markets and gains in financial stability will not be sustained—and new risks are likely to emerge—unless policymakers address key underlying vulnerabilities.
Filed under: Economic Crisis, Europe, Finance, Financial Crisis, growth, International Monetary Fund | Tagged: debt, euro area, GFSR, Global Financial Stability Report, IMF, iMFdirect, International Monetary Fund, Japan, reform, United States | Leave a comment »
Posted on April 16, 2013 by iMFdirect
By Olivier Blanchard
(Versions in عربي , 中文, 日本語, Русский, and Español)
The main theme of our latest outlook is one that you have now heard for a few days: we have moved from a two-speed recovery to a three-speed recovery.
Emerging market and developing economies are still going strong, but in advanced economies, there appears to be a growing bifurcation between the United States on the one hand, and the Euro area on the other.
This is reflected in our forecasts. Growth in emerging market and developing economies is forecast to reach 5.3% in 2013, and 5.7% in 2014. Growth in the United States is forecast to be 1.9% in 2013, and 3.0% in 2014. In contrast, growth in the Euro area is forecast to be -0.3% in 2013, and only 1.1% in 2014.
Filed under: Advanced Economies, Asia, Debt Relief, Economic Crisis, Economic outlook, Emerging Markets, Europe, Fiscal policy, growth, Low-income countries | Tagged: Brazil, China, economic forecasts, euro area, Europe, Germany, IMF, iMFdirect, India, International Monetary Fund, Italy, Japan, Olivier Blanchard, Spain, United States, WEO | 1 Comment »
Posted on January 23, 2013 by iMFdirect
by Olivier Blanchard
Version in Español and عربي
Optimism is in the air, particularly in financial markets. And some cautious optimism may indeed be justified.
Compared to where we were at the same time last year, acute risks have decreased. The United States has avoided the fiscal cliff, and the euro explosion in Europe did not occur. And uncertainty is lower.
But we should be under no illusion. There remain considerable challenges ahead. And the recovery continues to be slow, indeed much too slow.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Europe, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: banking union, Brazil, capital flows, China, debt, developing economies, emerging economies, euro area, Europe, European Central Bank, financial markets, fiscal cliff, fiscal consolidation, fiscal crisis, fiscal policy, France, Germany, government bonds, government debt and deficits, growth, IMF, iMFdirect, India, inflation, International Monetary Fund, Italy, Japan, Outright Monetary Transactions, Spain, United States, WEO, World Economic Outlook | 5 Comments »