Wed Nov 6, 2019, 12:38 PM

Europe Warned to Prepare for the Worst as IMF Sees Clouds Darken

Nikos Chrysoloras, Bloomberg News

The International Monetary Fund warned Europe to prepare emergency plans for an economic slump, as risks to the region’s outlook spread and monetary policy has all but exhausted its arsenal.

“Given elevated downside risks, contingency plans should be at the ready for implementation in case these risks materialize, not least because the scope for effective monetary policy action has diminished,” the IMF said in its Regional Economic Outlook for Europe. “A synchronized fiscal response” may be necessary, the fund said in the report, highlighting the dangers from trade protectionism, a chaotic Brexit and geopolitics.

The stark warning comes after the latest economic data showed that the euro-area economy is proving more resilient than anticipated, driven by robust expansion in countries such as France. Still, Germany probably went into a technical recession during the last quarter, while the labor market in the continent’s biggest economy started to deteriorate.

And there could more trouble ahead.

If the U.K. leaves the European Union in January without an orderly withdrawal agreement, the country’s economic output would be 3.5% lower in two years, according to the IMF’s forecast. The EU economy would be 0.5% smaller in that scenario.

Adding to Brexit uncertainty, “the weakness in trade and manufacturing could spread to other sectors -- notably services -- faster and to a greater extent than currently envisaged,” the IMF said. The report also warns about elevated asset prices in several countries -- including in real estate -- which are making banks more vulnerable to shocks, such as abrupt declines in risk appetite and tightening of financial conditions.


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Reply Europe Warned to Prepare for the Worst as IMF Sees Clouds Darken (Original post)
RCW2014 Nov 2019 OP
oflguy Nov 2019 #1

Response to RCW2014 (Original post)

Thu Nov 7, 2019, 08:25 PM

1. Did you get your IMF grant of $50,000 yet?

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