## Press Briefing Transcript: European Department, Spring Meetings 2025

_IMF News, April 25, 2025_

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## Bibliographic details
- Published: April 25, 2025

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### 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)._

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## References

- [Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)
- [Austria and the IMF](http://www.imf.org/external/country/AUT/index.htm)
- [Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)
- [Italy and the IMF](http://www.imf.org/external/country/ITA/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2025/04/25/tr-04252025-eur-press-briefing-transcript_