How Real Is The Recovery In The Euro Area?
IMF Blog, February 27, 2014
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- Authors: Reza Moghadam
- Published: February 27, 2014
Key indicators of an upturn
- Rising share prices.
- Lower sovereign bond yields.
- Increased risk appetite.
- An upturn in high-frequency indicators.
- The first signs of positive domestic demand in the euro area.
- The prospect of less drag from fiscal consolidation.
Major headwinds
- Debt owed by households and businesses remains high, making a rapid pick-up in consumption and investment unlikely.
- Contracting bank lending is holding back recovery.
- Relatively tougher credit conditions in the countries most in need of support are restraining growth.
- Reducing unacceptably high levels of unemployment depends on strong growth.
Assessment and policy implications
- The recovery is real, but the pace is weak.
- More policy actions are needed to boost growth and foster job creation.
- For more detailed assessment and policy prescriptions, the piece references a video and the IMF book "Jobs and Growth: Supporting the European Recovery," particularly for specifics on growth-enhancing structural reforms.
Reza Moghadam, February 27, 2014.