{ "title": "Transcript of European Department Press Briefing", "publication": "IMF News, April 21, 2017", "sourceUrl": "https://www.imf.org/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing", "canonical": "https://www.imf.org/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing", "overlayPath": "/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing/index.md", "summary": "Growth revised up to 1.7 percent; recovery is \"gaining a bit of strength.\"", "publishDate": "2017-04-21", "sections": [ { "heading": "Euro area: growth, inflation, fiscal and monetary stance", "content": "- Growth revised up to 1.7 percent; recovery is \"gaining a bit of strength.\"\n- Unemployment \"is down to single digits\" and \"is mostly structural\"; recoveries are divergent with uneven output gaps and fiscal space.\n- Aggregate fiscal stance for the euro area described as \"broadly appropriate\" and \"mildly expansionary.\"\n - Recommendation: Countries with fiscal space should use it.\n - Recommendation: Countries with high debt should consolidate to create fiscal buffers.\n- Monetary policy: ECB's stance assessed as \"appropriate.\"\n - Concern: Pressure in some countries could prompt \"premature tightening\" of policy.\n - Note: Countries close to full capacity may need \"inflation above the target for a longer period.\"\n- Financial sector:\n - Ongoing need to repair bank balance sheets.\n - Urgency to complete banking union.\n - ECB guidance on non-performing loans is \"an important step forward\"; need a determined strategy to reduce persistent non-performing loans.\n- Structural reforms:\n - Unemployment largely structural = urgency of reforms to boost productivity.\n - Potential growth remains \"low, relatively low\"; it will take many countries \"quite a long time\" to reduce unemployment to below pre-crisis levels.\n- Risks:\n - Short-term: \"probably equally balanced\" with potential upside if political uncertainties are clarified.\n - Medium-term: \"perhaps the downside risks dominating.\"" }, { "heading": "Eastern Europe (outside the CIS): cyclical position and policy mix", "content": "- Recovery \"largely complete\"; output gaps \"are almost closed\" and the outlook is positive.\n- Labor markets: signs of overheating in some economies; unemployment has fallen to pre-crisis levels; strong wage growth in several economies.\n- Inflation: \"has picked up,\" mainly because of oil prices; \"core inflation is still relatively subdued\" despite wage increases.\n- Key challenge: potential growth rates have \"declined significantly\" compared to pre-crisis (around half).\n - Causes: price legacies, depletion of early \"low-hanging fruits,\" weak institutions, investment gaps, unfavorable demographics.\n- Policy implications:\n - Several countries have fiscal policy \"too loose\" given cyclical strength - need for tighter fiscal policy.\n - Monetary policy: may need to \"gradually withdraw monetary accommodation\" if inflationary pressures accelerate; currently no \"significant pressure on core inflation.\"\n - Recommended policy mix: somewhat tighter fiscal policy to avoid overburdening monetary policy if inflation accelerates.\n - Overriding priority: structural reforms to boost potential growth, strengthen institutions, improve public sector and infrastructure." }, { "heading": "Russia and Turkey: diverging policy signals", "content": "- Russia: inflation \"has declined to the central bank target\" - further easing of monetary policy can continue.\n- Turkey: \"need for tightening monetary policy\" due to \"strong inflationary pressures.\"" }, { "heading": "Greece: program discussions, targets, debt treatment, and medium-term outlook", "content": "- Status: Good progress in recent weeks on program policies; outstanding issues remain; IMF mission returning next week.\n- Sequencing: discussions on policies precede discussion on debt; IMF will go to its Board only with a comprehensive plan credible on both policies and debt relief.\n- 2016 primary surplus reported by Greek Statistical Authority: 3.9%\n - Context: Greek budget for 2017 was based on an assumption that 2016 would be 1 percent of GDP; actual reported 3.9% is \"well above\" projections.\n - IMF view: the movement needs understanding; extraordinary outperformance relative to expectations.\n- IMF and ESM primary surplus targets:\n - IMF projects reaching 3.5% of GDP in 2019; ESM target is 3.5% in 2018 (difference described as \"inconsequential\" for DSA).\n - IMF preference: reach 3.5% \"a bit slowly\" given the state of the economy.\n - Key question under discussion: \"how long should it stay at 3.5%?\" IMF view: \"it should be a relatively short period.\"\n- Recommended fiscal use of space:\n - Use fiscal space to make budget more growth-friendly (more capital spending, well-targeted social benefits, lower excessively high tax rates) rather than sustain high primary surpluses to repay debt.\n- Liquidity: Greece \"would need support within the next couple of months\" to make payments scheduled for July; urgency to conclude program discussions.\n - IMF constraint: the Fund cannot disburse only to address a short-term liquidity hump; it requires a comprehensive program addressing medium-term issues.\n- Debt relief and what IMF needs before disbursing:\n - Eurogroup agreement last year set objectives: deliver gross financing need of 15 percent of GDP over the medium term and 20 percent over the very long run.\n - Agreed that debt relief need not be approved and effective before end of ESM program.\n - IMF requires:\n - Agreement on the path to the primary surplus (duration at 3.5% and the landing point).\n - More specificity on currently unspecified parts of the debt-relief menu.\n - A broad understanding sufficient to present to the IMF Board that measures would restore debt sustainability given the current DSA.\n - If policies and these debt issues are resolved, IMF will go to its Board with a new program.\n- Medium- and long-term outlook:\n - Potential for a rebound in output, but \"many years\" needed to restore unemployment and incomes to pre-crisis levels.\n - Deep structural reforms remain necessary: opening and liberalizing the economy, further fiscal structural reforms beyond pensions and tax, and significant public sector modernization." }, { "heading": "Ukraine: pension reform as program condition", "content": "- Pension reform has been part of the program from the start and has been delayed multiple times.\n- The pension fund faces a severe deficit (described as \"the second largest deficit in the world\").\n- Structural features: pensioner-to-contributor ratio \"something like 1 to 1\"; pensions are very low and have been eroded by inflation.\n- IMF position:\n - Increasing the effective retirement age is \"critical\" and is under discussion.\n - Pension reform (including raising effective retirement age) is an important part of the next review and required for a credible plan." }, { "heading": "Germany: current account surplus and rebalancing", "content": "- Germany's current account surplus described as \"large\" and \"much, much above where it should be in the medium term.\"\n- Longer-term justification: aging population supports some surplus, but equilibrium is lower than current levels.\n- Policy recommendations:\n - Use fiscal space to boost domestic demand.\n - Expect wages and inflation in Germany to rise \"above the European average\" over a period, helping gradual rebalancing.\n - Additional measures: liberalization and policies to retain more capital of exports domestically and boost investment attractiveness." }, { "heading": "Bosnia and Croatia: program engagement and corporate restructuring", "content": "- Bosnia:\n - Some prior actions for the current review have not been implemented, delaying review completion and potentially harming the economy.\n - IMF will remain engaged with authorities and parliament to overcome obstacles and bring the program back on track.\n- Croatia:\n - Large company (Agrocorp) in difficulty; IMF has no mandate or information to opine on individual firms.\n - IMF welcomes restructuring and will monitor given the firm's size and regional operations." }, { "heading": "Quantitative easing (QE) and ECB policy horizon", "content": "- IMF view: core inflation in Europe \"is still low\" and \"there is still clearly the case for ECB to continue the current accommodative monetary policy.\"\n- No further specification on duration was provided beyond saying accommodative policy should continue." }, { "heading": "Forecasting, past errors, and credibility issues", "content": "- Acknowledgement of forecasting errors over seven years of engagement with Greece:\n - First five years: IMF \"constantly overestimated the fiscal performance.\"\n - Last one and a half years: IMF \"have been wrong consistently on the other side\" and underestimated the impact of capital controls in 2015 and 2016.\n- Core issue: ability to reach short-term targets is not the only concern; maintaining targets over the medium term while achieving growth requires structural reforms and a growth-friendly fiscal reorientation." }, { "heading": "Politics and macroeconomic risks", "content": "- Political uncertainty across Europe (e.g., French, UK, German, Italian elections) is a notable risk with potential tail-risk impacts.\n- Clarification of political uncertainty could also unlock upside potential for growth.\n- IMF avoids speculating on specific electoral outcomes; emphasis is on policy choices that support growth and reform.\n\nTranscript of European Department Press Briefing, April 21, 2017.\n\n---\n\n\n References\n\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing" } ], "bullets": [ "[Markdown version](/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing/index.md)", "[Structured JSON version](/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing/index.json)", "[Bundle manifest](/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing/bundle-manifest.json)", "Published: April 21, 2017", "Growth revised up to 1.7 percent; recovery is \"gaining a bit of strength.\"", "Unemployment \"is down to single digits\" and \"is mostly structural\"; recoveries are divergent with uneven output gaps and fiscal space.", "Aggregate fiscal stance for the euro area described as \"broadly appropriate\" and \"mildly expansionary.\"", "Monetary policy: ECB's stance assessed as \"appropriate.\"", "Financial sector:", "Structural reforms:", "Risks:", "Recovery \"largely complete\"; output gaps \"are almost closed\" and the outlook is positive.", "Labor markets: signs of overheating in some economies; unemployment has fallen to pre-crisis levels; strong wage growth in several economies.", "Inflation: \"has picked up,\" mainly because of oil prices; \"core inflation is still relatively subdued\" despite wage increases.", "Key challenge: potential growth rates have \"declined significantly\" compared to pre-crisis (around half).", "Policy implications:", "Russia: inflation \"has declined to the central bank target\" -> further easing of monetary policy can continue.", "Turkey: \"need for tightening monetary policy\" due to \"strong inflationary pressures.\"", "Status: Good progress in recent weeks on program policies; outstanding issues remain; IMF mission returning next week.", "Sequencing: discussions on policies precede discussion on debt; IMF will go to its Board only with a comprehensive plan credible on both policies and debt relief.", "2016 primary surplus reported by Greek Statistical Authority: 3.9%", "IMF and ESM primary surplus targets:", "Recommended fiscal use of space:", "Liquidity: Greece \"would need support within the next couple of months\" to make payments scheduled for July; urgency to conclude program discussions.", "Debt relief and what IMF needs before disbursing:", "Medium- and long-term outlook:", "Pension reform has been part of the program from the start and has been delayed multiple times.", "The pension fund faces a severe deficit (described as \"the second largest deficit in the world\").", "Structural features: pensioner-to-contributor ratio \"something like 1 to 1\"; pensions are very low and have been eroded by inflation.", "IMF position:", "Germany's current account surplus described as \"large\" and \"much, much above where it should be in the medium term.\"", "Longer-term justification: aging population supports some surplus, but equilibrium is lower than current levels.", "Policy recommendations:", "Bosnia:", "Croatia:", "IMF view: core inflation in Europe \"is still low\" and \"there is still clearly the case for ECB to continue the current accommodative monetary policy.\"", "No further specification on duration was provided beyond saying accommodative policy should continue.", "Acknowledgement of forecasting errors over seven years of engagement with Greece:", "Core issue: ability to reach short-term targets is not the only concern; maintaining targets over the medium term while achieving growth requires structural reforms and a growth-friendly fiscal reorientation.", "Political uncertainty across Europe (e.g., French, UK, German, Italian elections) is a notable risk with potential tail-risk impacts.", "Clarification of political uncertainty could also unlock upside potential for growth.", "IMF avoids speculating on specific electoral outcomes; emphasis is on policy choices that support growth and reform.", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing/index.md", "json": "/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing/index.json", "bundleManifest": "/en/news/articles/2017/05/09/tr042117-transcript-of-european-department-press-briefing/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T20:48:36.491Z" }