{ "title": "Transcript of April 2020 European Department Press Briefing", "publication": "IMF News, April 15, 2020", "sourceUrl": "https://www.imf.org/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing", "canonical": "https://www.imf.org/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing", "overlayPath": "/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing/index.md", "summary": "Nonessential sectors subject to lockdowns account for about one-third of the average European economy.", "publishDate": "2020-04-15", "sections": [ { "heading": "Economic impact and IMF projections", "content": "- Nonessential sectors subject to lockdowns account for about one-third of the average European economy.\n- One months of closure will lead to a reduction in annual GDP in Europe by about 3 percent.\n- Assumption: outbreak will be contained and significant parts of economies can reopen around mid-year.\n- Under that assumption, projected outcomes for 2020:\n - European GDP will contract by 6.5 percent in 2020.\n - Advanced Europe: GDP growth will be minus 7 percent (previous forecast last autumn for 2020 was plus 1.5 percent).\n - Emerging Europe: GDP growth will be minus 5 percent (previous forecast for 2020 was plus 2.5 percent).\n- These projections rest on the assumption of a gradual normalization starting mid-year; forecast is subject to downside risks (e.g., a second wave necessitating renewed shutdowns) and upside risks (faster-than-expected reopening), with a greater concern for downside." }, { "heading": "Key risks and transmission channels", "content": "- Main near-term risk: negative spillovers from the real-economy shock to financial sectors.\n - Historical lesson: when balance sheets are materially affected and contagion hits the financial sector, post-crisis recoveries are slower and protracted.\n - As of the briefing: no widespread financial-sector contagion observed, but it is monitored closely.\n- Uncertainty about duration until treatment or vaccine affects medium-term outlook and public indebtedness trajectory.\n- Specific sectoral vulnerabilities highlighted:\n - Tourism-dependent economies (e.g., Italy, Spain, Greece, Portugal) face larger impacts.\n - Large shares of small and medium-sized enterprises with limited buffers increase vulnerability.\n - Banking-sector weaknesses (e.g., non-performing loans in Greece) limit policy space to support recovery." }, { "heading": "Policy response — fiscal, monetary, regulatory", "content": "- Fiscal policy:\n - Countries have ramped up health spending and provided large-scale targeted support to households and businesses.\n - Bulk of business support has taken the form of loan guarantees; household support via strengthened unemployment insurance and direct income support.\n - Fiscal deficits in Europe are set to increase by about 6 percent of GDP in 2020.\n - IMF view: large fiscal response is appropriate, should be well targeted, temporary, and avoid socializing pre-existing losses.\n- Monetary policy:\n - Central banks have reduced policy rates and announced further large asset purchase programs, including asset classes previously excluded.\n - These measures have helped counter sharp tightening in financial conditions.\n - Concerns about monetary policy ineffectiveness due to low pre-crisis rates were proven unfounded.\n - Specific support: strong endorsement of ECB's large asset purchase program and readiness to provide targeted support by temporarily deviating from its capital key when making purchases.\n- Financial regulation:\n - Financial regulators have lowered capital requirements by releasing cyclical buffers and, in some cases, temporarily eased other regulatory norms.\n- IMF operational support:\n - IMF has received requests under its Rapid Financing Instrument from six smaller, emerging economies outside the EU; three of these requests have already been approved last week." }, { "heading": "Euro area coordination, instruments, and fiscal capacity", "content": "- European-level support:\n - The Eurogroup package approved last week totals 500 billion euros.\n - IMF view: the 500-billion-euro package is a \"very strong support.\"\n - Leaders have signaled readiness to do more if the situation proves more difficult than expected.\n- Corona bonds:\n - IMF has not taken a position on Corona bonds specifically.\n - IMF emphasizes importance of ensuring countries, including those with relatively high debt, can take necessary action without unsettling markets or increasing spreads.\n - Medium-term discussions on common fiscal solutions are premature given current uncertainty about the pandemic’s duration and ultimate increase in public debt.\n- Policy space:\n - Advanced Europe generally has more policy space due to deeper and more liquid financial markets and stronger policymaking frameworks.\n - Emerging Europe inside the EU has generally reduced vulnerabilities since the global financial crisis (smaller external current account deficits, reduced banking reliance on foreign funding).\n - Least policy space seen in smaller emerging economies outside the EU; IMF is rapidly deploying assistance." }, { "heading": "Country-specific assessments and questions raised", "content": "- Italy:\n - Among the hardest hit; negative impact on GDP expected to be somewhat higher than similarly large northern countries, in part due to dependence on tourism.\n - Fiscal response is strong and appropriate; decision to use the ESM is up to Italian policymakers.\n- Spain:\n - Expected to suffer a strong recession; vulnerabilities include dependency on tourism and large numbers of small and medium-sized enterprises.\n - IMF forecast referenced an unemployment rate of about 20 percent in Spain this year, an increase of 7 percentage points from October.\n- Portugal:\n - Similar vulnerabilities to Spain: reliance on tourism, services, and many small and medium-size enterprises; possible labor market inflexibilities.\n- Greece:\n - Will be particularly hard hit due to dependence on tourism, shipping and transportation, prevalence of small family-owned enterprises, and remaining banking-sector weaknesses (high non-performing loans).\n - Greece had been building growth momentum pre-crisis; medium-term debt and sustainability implications are too uncertain to assess until pandemic trajectory is clearer.\n- Ukraine:\n - Severely affected by the pandemic; government measures will result in a very significant increase in the fiscal deficit and IMF support is fully endorsed.\n - Progress under prior IMF-supported program has improved macroeconomic stability: banking stability improved, inflation down, external and fiscal deficits down, public debt down, and foreign reserves \"well over 20 billion.\"\n - Discussions on a new IMF program are well advanced with a few issues outstanding; IMF is confident recommendations to its Board can follow soon." }, { "heading": "Financial sector structure and consolidation questions", "content": "- European banking system challenges pre-date the pandemic:\n - Low profitability and indications that Europe may be \"overbanked\" (excess branches).\n - Need for rationalization and potential consolidation — national and/or cross-border — remains an open question.\n - Pace and nature of consolidation will depend on broader policy architecture progress (capital markets union, banking union)." }, { "heading": "IMF priorities and timing", "content": "- Immediate priority: ensure countries have the policy space needed to maintain forceful responses until the medical emergency is under control.\n- Emphasis on saving lives and mitigating social hardship in the near term; medium-term issues (debt trajectories, structural fiscal arrangements) are deferable until uncertainty about pandemic duration dissipates.\n\nTranscript of April 2020 European Department Press Briefing, April 15, 2020 — IMF Communications Department; Poul Thomsen, Director, European Department\n\n---\n\n\n References\n\n- Poul M. Thomsen\n- Greece and the IMF\n- Italy and the IMF\n- Portugal and the IMF\n- Spain and the IMF\n- Ukraine and the IMF\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing" } ], "bullets": [ "[Markdown version](/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing/index.md)", "[Structured JSON version](/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing/index.json)", "[Bundle manifest](/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing/bundle-manifest.json)", "Published: April 15, 2020", "Nonessential sectors subject to lockdowns account for about one-third of the average European economy.", "One months of closure will lead to a reduction in annual GDP in Europe by about 3 percent.", "Assumption: outbreak will be contained and significant parts of economies can reopen around mid-year.", "Under that assumption, projected outcomes for 2020:", "These projections rest on the assumption of a gradual normalization starting mid-year; forecast is subject to downside risks (e.g., a second wave necessitating renewed shutdowns) and upside risks (faster-than-expected reopening), with a greater concern for downside.", "Main near-term risk: negative spillovers from the real-economy shock to financial sectors.", "Uncertainty about duration until treatment or vaccine affects medium-term outlook and public indebtedness trajectory.", "Specific sectoral vulnerabilities highlighted:", "Fiscal policy:", "Monetary policy:", "Financial regulation:", "IMF operational support:", "European-level support:", "Corona bonds:", "Policy space:", "Italy:", "Spain:", "Portugal:", "Greece:", "Ukraine:", "European banking system challenges pre-date the pandemic:", "Immediate priority: ensure countries have the policy space needed to maintain forceful responses until the medical emergency is under control.", "Emphasis on saving lives and mitigating social hardship in the near term; medium-term issues (debt trajectories, structural fiscal arrangements) are deferable until uncertainty about pandemic duration dissipates.", "[Poul M. Thomsen](https://www.imf.org/en/about/senior-officials/archive/poul-mathias-thomsen)", "[Greece and the IMF](http://www.imf.org/external/country/GRC/index.htm)", "[Italy and the IMF](http://www.imf.org/external/country/ITA/index.htm)", "[Portugal and the IMF](http://www.imf.org/external/country/PRT/index.htm)", "[Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)", "[Ukraine and the IMF](http://www.imf.org/external/country/UKR/index.htm)", "[Transcripts](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing/index.md", "json": "/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing/index.json", "bundleManifest": "/en/news/articles/2020/04/15/tr041520-transcript-of-april-2020-european-department-press-briefing/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T23:37:06.210Z" }