2014 Article IV Consultation with the Euro Area Concluding Statement of the IMF Mission


Les dejo algunas ideas...

*       Activity and investment have yet to reach pre-crisis levels. The recovery of private investment has been weaker than in most previous recessions and financial crises. In the first quarter of 2014, growth was weaker than expected and unevenly distributed across countries.
*       Balance sheets are still impaired and debt levels elevated. Public debt levels remain high. Weakness in banks' balance sheets inhibits the flow of credit and corporate and household debt overhangs impede demand.
*       Inflation is worryingly low, including in the core countries. By keeping real interest rates and real debt burdens elevated, very low inflation stifles demand and growth. It also makes difficult the adjustment in relative prices and real wages that must occur for sustainable growth to take hold.
*       Unemployment, especially among the youth, is unacceptably high. The average rate for the euro area is around 12 percent. Youth unemployment is even more elevated, averaging close to 25 percent. High unemployment erodes skills and human capital, inflicting permanent

The ECB's willingness to do more, if necessary, is reassuring. If inflation remains stubbornly low, the ECB should consider a large-scale asset purchase program, primarily of sovereign assets according to the ECB's capital key. This would boost confidence, improve corporate and household balance sheets, and stimulate bank lending. Overall, it holds the potential to have a significant impact on demand and inflation.

After several years of consolidation, the overall fiscal stance for the euro area is close to neutral. This strikes the right balance between demand support and debt reduction. But large negative growth surprises should not trigger additional consolidation efforts.

José Luis Martínez Campuzano
Estratega de Citi en España