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Euro zone remains at risk – IMF

cde.news desk · 1 min read
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epa04412427 A banner with a redesigned ten euro note on the facade of the building of the DNB, the central bank of the Netherlands, in Amsterdam, The Netherlands, 22 September 2014. The notes, that contain extra security features to make it more difficult for counterfeiters to reproduce, will be put in circulation on 23 September 2014. EPA/LEX VAN LIESHOUT

The euro zone remains at risk of being hit by debt-crisis-style country-specific shocks, the head of the International Monetary Fund’s European department said on Friday.

“Risk to the euro area’s stability arising from country-specific shocks, risks that were so violently displayed in the euro zone crisis, remain very serious,” the IMF’s Poul Thomsen said in a speech at the London School of Economics.

Euronews reports that Thomsen said that this concern is driven by low potential growth rates and high structural unemployment due to a lack of reforms, and had not taken sufficient advantage of several years of relatively robust growth to reduce debt.

“In some cases, fiscal policy for the last couple of years has actually been pro-cyclical,” Thomsen said.

“Therefore they are left with even less fiscal space to counter shocks that are country-specific, with a correspondingly higher risk in the future of a shock that would force them into pro-cyclical tightening just when things start screwing up.”

via Euronews 

 

Topics EconomyEuro ZoneIMF