Press Briefing Transcript: European Department, Spring Meetings 2025
IMF News, April 25, 2025
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- Published: April 25, 2025
Overview and headline outlook
- Date: April 25, 2025
- IMF officials: MR. HELGE BERGER, MS. OYA CELASUN, MR. ALFRED KAMMER (European Department); MS. CAMILA PEREZ (Moderator).
- Key drivers of the updated outlook:
- Meaningful downgrade for Europe reflecting the impact of tariffs, partially compensated by increased infrastructure spending and defense spending (noted in particular from Germany).
- Biggest negative impact attributed to uncertainty and tighter financial conditions.
- CESEE (Central, Eastern, and Southeastern Europe) is more affected than the Euro area due to a larger manufacturing sector and greater exposure to tariffs.
- Medium-term outlook: persistently weak growth relative to global peers driven by a “large productivity gap” that needs to be addressed.
Quantified projections and estimates (as reported)
- Structural reform payoff (EU-level): implementation would add "3 percent to the level of GDP in Europe."
- Country-level partial convergence gains if countries close gaps to best-practice countries by 50 percent:
- Advanced European countries: "5 percent" boost to the level of GDP.
- CESEE countries: "6 to 7 percent" boost to the level of GDP.
- Western Balkan countries: "9 percent" increase in GDP.
- Monetary policy guidance for the Euro area:
- Recommend "one more cut in the summer of 25 basis points and then keep the rate on hold at 2 percent" unless major shocks require recalibration.
- Germany:
- Defense spending noted as "about 1.5 percent of GDP relative to 2021."
- IMF forecasts (excluding that defense spending) indicate Germany will keep deficits "below 3 percent."
- Russia:
- IMF forecasted potential growth has "fallen significantly to 1.2 percent."
- Ukraine:
- World Economic Outlook growth forecast updated to "up to 2 percent this year" versus the November forecast "2.5-3.5 percent."
- Italy:
- Reported comment: growth forecast was "cut in half, almost from 0.7 to 0.4." (Two mentions of Italy’s downgrades appear in the transcript; see full briefing for context.)
- Exchange-rate / competitiveness notes:
- IMF comments that Europe currently runs a current account surplus versus the rest of the world; the narrative that "Europe is not competitive" is rejected.
Monetary policy assessment and guidance
- Euro area:
- Disinflation effort judged successful; IMF projects the inflation target will be hit "in the second half of 2025."
- Recommended path: "one more cut in the summer of 25 basis points and then keep the rate on hold at 2 percent" unless major shocks arise.
- Caution: ECB policy should not be expected to go below "2 percent" absent shocks, according to the briefing.
- CESEE:
- Inflation described as "more persistent and still higher," requiring more caution on easing.
Fiscal policy guidance
- General:
- Fiscal consolidation should continue to build buffers for the next shock and to create fiscal space for long-term spending pressures (aging, health care, energy transition, accelerated defense spending).
- Germany:
- Fiscal stimulus package will lift aggregate demand, with peak effects expected in 2026; infrastructure spending is highlighted as welcome and potentially supportive of long-term potential growth if fully spent.
- Germany is judged to currently have fiscal space: low debt, low deficits, low borrowing costs.
- Ukraine:
- Need for a medium-term national revenue strategy emphasized to finance post-war reconstruction and modern state services.
- IMF stance on debt restructuring:
- For Ukraine, a "credible process underway with private creditors" is described as important and part of the Fund program to restore sustainability.
Structural reforms and policy recommendations
- Central message: "More trade is better" — IMF encourages completion and expansion of trade agreements and de-escalation of trade tensions.
- EU-level reforms:
- A shared diagnostic and policy-solution set exists; implementation urgency is stressed.
- Identified EU-level reform implementation would yield "3 percent to the level of GDP in Europe."
- National structural priorities:
- Labor market reforms, including upskilling and reskilling, are prioritized.
- For Austria and similar countries: raise female and elderly labor force participation (childcare and elder care availability and access highlighted).
- For Germany: cut red tape, boost public infrastructure delivery, increase labor force participation (including helping women work full-time).
- Business dynamism and capital markets:
- Europe needs deeper capital markets and more risk/equity financing to allow startups to scale so successful firms can grow domestically rather than listing abroad.
- Identified barriers: financial frictions, small/fragmented capital markets, insufficient risk capital and exit opportunities.
Trade tensions, tariffs, and global spillovers
- Tariffs and trade uncertainty:
- Tariffs are identified as a meaningful drag on growth and contributor to the regional downgrade.
- Trade uncertainty has amplified tighter financial conditions and weighed on investment and confidence.
- IMF urges de-escalation and constructive negotiations, noting the U.S. is a large EU trading partner.
- Russia-Europe trade:
- Observed decoupling: "trade has been reduced quite considerably"; Russia has pursued import substitution and reoriented trade toward China and India.
- Continued isolation would impair technology transfer and lower Russia’s potential growth (noted at "1.2 percent").
Country-specific highlights and policy notes
- Germany:
- Fiscal stimulus provides near-term demand lift, peak effect expected in 2026.
- Infrastructure spending could raise potential growth if fully spent.
- Defense spending increase noted ("about 1.5 percent of GDP relative to 2021").
- Italy:
- Growth downgrade discussed (reported as "cut in half, almost from 0.7 to 0.4"); public investment under the NRP is surging and welcomed.
- Policy advice: continue structural reforms in education, business environment, and labor market participation.
- Ukraine:
- Growth forecast revised down to "up to 2 percent this year" from November forecast "2.5-3.5 percent."
- IMF praises Ukraine’s economic team for maintaining macro stability; emphasizes need for revenue reforms and a credible private creditor process under the Fund program.
- Russia:
- Noted sharp slowdown in 2025; potential growth "1.2 percent" cited; reorientation of trade and reduced convergence to Western living standards if isolation continues.
- Türkiye:
- Small upward revision in growth owing partly to strong carryover from late 2024.
- IMF recommends faster disinflation via a tighter macroeconomic policy mix with the "linchpin" being tighter fiscal policy.
- United Kingdom:
- IMF position: more trade agreements are welcome; any trade deals that improve trading relationships are encouraged.
- Bulgaria:
- IMF signals accession to the euro area is feasible: Bulgaria has made major progress (deficits "in line with the EU fiscal framework of 3 percent"; inflation coming down); euro adoption would be welcomed but should be on a strong footing.
Risks, communication, and political economy
- Major shocks could require recalibration of monetary stance; IMF notes inflation and wage dynamics still uncertain.
- Implementation challenge: structural reforms face political economy resistance; IMF suggests package approaches and stronger communication on single-market gains to overcome vested interests.
- Social protection and active labor-market policies recommended to manage dislocation from trade and technological change (reference to the Flexicurity model in Denmark as an example).
Transcript of IMF Press Briefing, European Department, Spring Meetings 2025 (April 25, 2025).