German Economy Minister Philipp Rösler, earlier this week sent a message to the eurozone countries advising them to keep the direction set for the budgetary adjustment, stating that his country will insist on austerity policy.
In favor of continuing reforms was also David Lipton, IMF deputy managing director, who warned that the reforms should be accompanied by measures of development to prevent Europe falling into a period of stagnation. In an interview in London, David Lipton said that Europe must continue to adopt crucial reforms if it wants to leave behind the crisis and finally return to growth and job creation. He added that this process is not guaranteed in any way, but it is achievable.
Talking about the risk for Europe to fall into stagnation, he urged European politicians to act now to strengthen growth prospects. Investment declines and the number of jobs continue to drop in a Europe that is behind the U.S. and emerging countries in what the IMF called a “three-speed recovery” of the global economy. He also said that the choice is not simply between austerity and development, but as European countries must clean the public finances, they have to be able to do so to ensure that their budgetary policies are “pro-development”. Lipton also said that the European Central Bank still has a little scope for greater relaxation, given that inflationary pressures are kept under control and that there might be a need for further unconventional measures and action by monetary union.
More flexible seemed Commissioner Olli Rehn, who said in a press conference on Thursday that the EU continues to consolidate public finances, but that – after partially restoring their credibility on the markets – now they are slowing the adjustment.
Meanwhile, the German minister of economy announced Wednesday its new forecasts on the progress of the German economy, about a 0.5% growth this year and 1.6% in 2014. The German minister spoke about France but he avoided criticizing it for failing to fulfil its target on budget deficit, saying that it’s known that France made the greatest effort possible to achieve a fiscal adjustment and improve the competitiveness of its economy.
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