Greece: Past Critiques and the Path Forward


IMG_0248By Olivier Blanchard

(Versions in DeutschEspañolFrançaisItalianoελληνικάРусский中文, 日本語عربي, and Português)

All eyes are on Greece, as the parties involved continue to strive for a lasting deal, spurring vigorous debate and some sharp criticisms, including of the IMF.

In this context, I thought some reflections on the main critiques could help clarify some key points of contention as well as shine a light on a possible way forward.

The main critiques, as I see them, fall under the following four categories:

  • The 2010 program only served to raise debt and demanded excessive fiscal adjustment.
  • The financing to Greece was used to repay foreign banks.
  • Growth-killing structural reforms, together with fiscal austerity, have led to an economic depression.
  • Creditors have learned nothing and keep repeating the same mistakes.

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Behind the News in Greece and China, Moderate Growth Continues


 By Olivier Blanchard

(Versions in Español and عربي)

Today we published the World Economic Outlook Update.

But first, let me talk about the elephant in the room, namely Greece.

The word elephant may not be right: As dramatic as the events in Greece are, Greece accounts for less than two percent of the Eurozone GDP, and less than one half of one percent of world GDP.
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Greece: A Credible Deal Will Require Difficult Decisions By All Sides


blanchBy Olivier Blanchard

(Versions in 中文Françaisελληνικά, عربي, and Español)

The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week.  At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?

In the program agreed in 2012 by Greece with its European partners, the answer was:   Greece was to generate enough of a primary surplus to limit its indebtedness.  It also agreed to a number of reforms which should lead to higher growth.  In consideration, and subject to Greek implementation of the program, European creditors were to provide the needed financing, and provide debt relief if debt exceeded 120% by the end of the decade.

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Financial Risks Rise Amid Uneven Global Economic Recovery


GFSR

By José Viñals

(Versions in عربي and Español)

The three main messages from this Global Financial Stability Report are:

  1. Risks to the global financial system have risen since October and have rotated to parts of the financial system where they are harder to assess and harder to address.
  2. Advanced economies need to enhance the traction of monetary policies to achieve their goals, while managing undesirable financial side effects of low interest rates.
  3. To withstand the global crosscurrents of lower oil prices, rising U.S. policy rates, and a stronger dollar, emerging markets must increase the resilience of their financial systems by addressing domestic vulnerabilities.

Let me now discuss these findings in detail. 

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Four Forces Facing the Global Economy


WEOBy Olivier Blanchard 

(Versions in عربي and Español)

In our April 2015 World Economic Outlook, we forecast global growth to be roughly the same this year than last year, 3.5% versus 3.4%.   This global number reflects an increase in growth in advanced economies, 2.4% versus 1.8%, offset by a decrease in growth in emerging market and developing economies, 4.3% versus 4.6% last year.   In short, to repeat the words used by the IMF Managing Director last week, we see growth as “moderate and uneven”.

Behind these numbers lies an unusually complex set of forces shaping the world economy.  Some, such as the decline in the price of oil and the evolution of exchange rates, are highly visible.  Some, from crisis legacies to lower potential growth, play more of a role behind the scene but are important nevertheless.  Let me briefly review them.

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Making Small Beautiful Again: The Challenge of SME Problem Loans in Europe


By Yan Liu, Kenneth Kang, Dermot Monaghan, and Wolfgang Bergthaler

Six years after the global financial crisis, Europe continues to be weighed down by high levels of corporate debt and millions of nonperforming loans. Small and medium-sized enterprises (SMEs) bear a disproportionately heavy burden. Their nonperforming loan ratios are on average more than double those of their larger corporate cousins. This is worrisome. SMEs are the lifeblood of the European economy, comprising 99 percent of all businesses and employing nearly two of every three workers in Europe. Given the importance of smaller businesses to the economy, addressing their problem loans could lay the foundation for a more robust and sustainable economic recovery.

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Investment in the Euro Area: Why Has It Been So Weak?


By Bergljot Bjørnson BarkbuS. Pelin Berkmen, and Hanni Schölermann

Investment in the euro area, and particularly private investment, has not recovered since the onset of the global financial crisis.

In fact, the decline in investment has been much more drastic than in other financial crises; and is more in line with the most severe of these crises (see Chart 1). The October 2014 World Economic Outlook showed that many governments cut investment because their finances became strained during the crisis. In addition, housing investment collapsed in some countries, reflecting a natural scaling back after an unsustainable boom. But what is holding back private non-residential investment?

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