The IMF is actively engaged in Europe as a provider of policy advice, financing, and technical assistance. We work both independently and, in European Union (EU) countries, in cooperation with European institutions, such as the European Commission (EC) and the European Central Bank (ECB). The IMF's work in Europe has intensified since the start of the global financial crisis in 2008, and has been further stepped up since mid-2010 as a result of the euro area crisis.
Assessing individual countries and the euro area
The IMF provides economic analysis and policy advice as part of its standard surveillance process for individual advanced and emerging European economies that culminates in regular (usually annual) consultations with individual member countries. The final bilateral surveillance staff reports from these consultations include assessments of the economic outlook, and economic and financial stability.
In addition to its policy discussions with the 19 individual members of the euro area, IMF staff also holds consultations annually for the euro area as a whole, similar to those held for other currency unions. Here, IMF staff exchange views with counterparts from the ECB, the EC and other European institutions in a number of areas, including monetary and exchange rate policies and area-wide fiscal policies, financial sector supervision and stability, trade and cross-border capital flows, as well as other structural policies. An assessment of the economic outlook, external and fiscal position of the euro area as a whole, as well as financial stability assessments is also included in the final staff report as part of the overall assessment.
As part of the consultation, staff presents the IMF’s views on the economic outlook and policies of the euro area to the Eurogroup, comprising the 19 finance ministers of the euro area.
Global and regional analysis, spillovers and cross-cutting themes
The outlook, policy recommendations and risks, and spillovers for individual advanced and emerging European countries and the euro area are assessed in a global context in the World Economic Outlook, the Global Financial Stability Report, Fiscal Monitorand theExternal Sector Report—the IMF flagship publications published twice a year. These discussions are integral elements of the IMF’s surveillance of economic developments and policies, and financial stability in its member countries.
The IMF also produces annual “spillover reports” focusing on the five economies in the world that have the greatest impact on other countries through trade, financial, and other links. Two of these economies are the euro area and the United Kingdom. The goal of spillover reports is to examine outward spillovers from countries whose policies or circumstances may significantly affect the stability of the global financial system.
Since 2013, the Fund has also undertaken country analysis emphasizing cross-cutting issues in a new way of monitoring its member countries. This new approach—which analyzes clusters of economies that have strong interlinkages or common concerns—complements the Fund’s bilateral and multilateral surveillance.The projects include the Nordic Regional Report, the German-Central European Supply Chain Report, the Baltic Cluster Report, and the Housing Cluster Report.
For Central, Eastern and Southeastern Europe (CESEE), the IMF publishes CESEE Regional Economic Issues; a semi-annual publication that discusses analytical issues of broader interest to the region.
Euro Area Integration
The IMF pays considerable attention to progress in fostering integration within the euro area to ensure the effective operation of the monetary union. The first-ever EU wide Financial Sector Assessment Program (FSAP), in March 2013, outlined important progress in addressing the financial crisis in Europe, but also argued for fast and sustained progress toward a Single Supervisory Mechanism (SSM). In addition, the IMF published papers arguing for a Banking Union to strengthen the EU financial oversight framework and sever bank-sovereign feedback loops; making the case for a Fiscal Union to help address a number of gaps in the euro area’s architecture; proposing measures to achieve the dual objectives of restoring external and internal balance; and recommending solutions to the address high youth unemployment problem in the region.
Since the start of the global financial crisis, a number of emerging European countries have requested financial support from the IMF to help them overcome their fiscal and external imbalances. Four members of the euro area―Greece, Portugal, Ireland, and Cyprus―also accessed IMF resources.
Access to IMF resources for Europe is being provided through Stand-By Arrangements (SBA), the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL), and the Extended Fund Facility (EFF). Ireland’s and Portugal’s EFFs concluded in December 2013 and June 2014, respectively, and they then entered into Post-Program Monitoring (PPM).
As of March 23, 2015, the IMF had arrangements with 8 countries in Europe (see table) with commitments totaling about €71.3 billion or $78.8 billion.
Most of the first wave of IMF-supported programs in 2008-09 was for countries in emerging Europe. The IMF provided front-loaded, flexible, and high levels of financing for many emerging European countries. In most EU countries—including in Hungary, Latvia, and Romania—this financing was provided in conjunction with the EU, while Poland has a Flexible Credit Line arrangement with the Fund. The IMF also provided financing to Iceland when its banking system collapsed in late 2008.
The experience developed with the joint programs in Central and Eastern Europe proved useful when euro area countries requested IMF support. At that stage, the collaboration was further extended to include another partner—the ECB. This enhanced cooperation between the IMF, the EC, and the ECB in euro area program countries has become known as the “Troika.”
Cooperation through the Troika is aimed at ensuring maximum coherence and efficiency in staff-level program discussions with governments on the policies that are needed to put their economies back on the path of sustainable economic growth.
While the IMF coordinates closely with the other members of the Troika, Fund decisions on financing and policy advice are ultimately taken independently of the Troika process by the IMF’s 24-member Executive Board.
|IMF-Supported Programs in Europe
|As of March 23, 2015, the IMF had arrangements with 8 countries in Europe, totaling about € 71 billion or $ 78 billion.
||Amount Agreed (billions)
||Undrawn Balance (billions)
|Extended Fund Facility
|Flexible Credit Line
|Source: IMF Staff calculations.
|1 Poland, Romania and Serbia's arrangements are treated as precautionary by the authorities.
|2 Calculated using the prevailing exchange rate on March 23, 2015.
Where the money comes from
Most of the IMF resources allocated to different activities in Europe are provided by member countries, primarily through their payment of quotas. Starting in early 2009, the IMF signed a number of new bilateral loan and note purchase agreements to bolster its capacity to support member countries during the global economic crisis. In early 2011, the amended and expanded Arrangements to Borrow (NAB) became effective and was activated. At that point, the bilateral agreements of NAB participants were folded into the NAB. In April 2013, all the 2009 bilateral agreements were terminated.
In December 2011, euro area countries committed to providing additional resources to the IMF of up to 150 billion euro (about $200 billion). Following the request of our membership last year through the International Monetary and Financial Committee and the general support by the G-20 leaders at the Cannes Summit, the IMF Executive Board discussed the adequacy of the Fund’s resources in January and March 2012. In mid-2012, numerous member countries pledged about $461 billion in additional bilateral commitments to further augment the IMF’s resources.
The European Bank Coordination Initiative
The Vienna Initiative was launched at the height of the financial crisis in 2008/09 to help avoid a rush-to-the-exit of Western European cross-border banking groups whose subsidiaries dominate the banking systems of CESEE. Banks entered into explicit exposure maintenance agreements in the case of five program countries. This Initiative brings together key International Financial Institutions (EBRD, WB, and IMF), the European Commission and relevant EU institutions, the main cross-border banking groups, and home and host country authorities.
The initiative was re-launched as Vienna 2 in January 2012 in response to a second wave of deleveraging and supervisory ring-fencing. The focus is on improving cooperation between home and host authorities, while monitoring the pace of deleveraging with a view to keeping it orderly and following credit developments. It publishes quarterly CESEE Deleveraging and Credit Monitor, makes recommendations to relevant European institutions for improvements in supervisory coordination and cross-border bank resolution, and organizes “Host Country Cross-Border Banking Forums.” These forums provide an opportunity for dialogue between the banks that are systemically important in a country and major interlocutors of those banks: the monetary authority and regulator, the parent international banking groups, and the latter’s regulators. So far, these forums have been held in Albania, Bosnia, Croatia, Hungary, Serbia, Slovenia, Montenegro, and Ukraine.
Providing technical expertise
The IMF’s technical assistance helps countries improve the capacity of their institutions and the effectiveness of their policymaking. As such, it contributes to the overall effectiveness of the Fund’s surveillance and lending programs.
The IMF provides technical assistance in a number of areas, including macroeconomic policy, tax policy and revenue administration, expenditure management, monetary policy, the exchange rate system, financial sector stability, legislative frameworks, and macroeconomic and financial statistics. In particular, efforts in recent years to strengthen the international financial system, including in Europe, have triggered additional demands for IMF technical assistance. For instance, the IMF provided assistance to monitor Spain’s financial sector, in the context of the recently-completed ESM-supported program, by providing independent advice, including monitoring the progress on the financial sector reforms to which the government had committed. The IMF also provided assistance on tax policy and revenue administration issues to a number of countries, including Denmark, Finland, Italy, Portugal, Greece, Estonia, and Slovakia.
The IMF delivers technical assistance in various ways. Support is often provided through staff missions of limited duration sent from headquarters, or the placement of experts and/or resident advisors for periods ranging from a few weeks to a few years. Assistance might also be provided in the form of technical and diagnostic studies, training courses, seminars, workshops, and “on-line” advice and support.
The IMF has increasingly adopted a regional approach to the delivery of technical assistance and training. The IMF Institute organizes courses for officials from new EU member countries and other economies in transition in Europe and Asia at the Joint Vienna Institute in Austria.