The IMF today said it believed the eurozone's stability and growth pact was a sound framework for fiscal discipline that was being undermined by poor performances in France, Germany and Italy. "The core of the problem is the three largest countries haven't lived up to the rules," said Michael Deppler, IMF director for the eurozone, in a press briefing on the IMF's annual review of the area's economy.
The IMF also cut growth projections for the euro area economy both this year and next, and called for the European Central Bank to adopt a clear easing bias given the downside risks which predominate. "We don't see a very robust recovery in prospect," Deppler said. He added that the IMF strongly supported the stability and growth pact, and that it was "being wrongly undermined by inadequate policies in the three largest countries."
IMF executive directors called in a statement for a "concerted and credible commitment" by these three to firm their budgets by 0.5 percentage points a year over the next several years in order to reach "close to" balanced budgets. //www.fxcentre.com