Monday, September 6, 2010 - 03:37
IMF Chief Econ: Europe, U.S. Growth To Remain Weak: Press
FRANKFURT (MNI) - Prospects for economic growth in Europe and the United States are likely to stay limited despite deviations from expectations last quarter, International Monetary Fund Chief Economist Olivier Blanchard said in an interview published Monday.
"One swallow does not make springtime," Blanchard told France's Le Figaro. Notwithstanding better-than-expected 2Q GDP data in Europe and the opposite in the U.S., "growth will probably remain weak both in the United States and in Europe."
Blanchard said he did not agree that the sovereign debt crisis was over and its real consequences limited, noting the "painful process of adjustment" facing countries like Greece and Portugal.
"For the moment, the measures taken by the European authorities, with the help of the IMF, have calmed the markets," he said. "But the countries in difficulty must at the same time rebalance their budgets and respond to their problems of competitiveness, which will take years."
Whether Europe brings its overall budget deficit within the 3%-of-GDP limit by 2013 or 2014 "matters little," Blanchard said. What matters is that "each government present a plan for medium-term consolidation that is coherent and credible."
If markets are confident of medium-term success, governments will have short-term breathing room, he said.
Economic weakness in leading economies will limit the short-term performance of emerging nations, Blanchard asserted. A renewed U.S. slowdown would have a "not enormous, but nonetheless significant" effect on Asia.
Only in the medium term might there be a decoupling between emerging markets and G-7 countries, he said.
Asked if the G-20 should make exchange rates part of its agenda, Blanchard implied that it would not be a good idea. The "great structural change" implied by a reorientation toward internal demand within, for example, China, will take place in time and include a revaluation of the currency as one of "a multitude of measures," he said.
"It would be counterproductive to focus on the exchange rate; it is only one of the pieces of the puzzle," Blanchard said.
IMF Chief Econ: Europe, U.S. Growth To Remain Weak: Press
FRANKFURT (MNI) - Prospects for economic growth in Europe and the United States are likely to stay limited despite deviations from expectations last quarter, International Monetary Fund Chief Economist Olivier Blanchard said in an interview published Monday.
"One swallow does not make springtime," Blanchard told France's Le Figaro. Notwithstanding better-than-expected 2Q GDP data in Europe and the opposite in the U.S., "growth will probably remain weak both in the United States and in Europe."
Blanchard said he did not agree that the sovereign debt crisis was over and its real consequences limited, noting the "painful process of adjustment" facing countries like Greece and Portugal.
"For the moment, the measures taken by the European authorities, with the help of the IMF, have calmed the markets," he said. "But the countries in difficulty must at the same time rebalance their budgets and respond to their problems of competitiveness, which will take years."
Whether Europe brings its overall budget deficit within the 3%-of-GDP limit by 2013 or 2014 "matters little," Blanchard said. What matters is that "each government present a plan for medium-term consolidation that is coherent and credible."
If markets are confident of medium-term success, governments will have short-term breathing room, he said.
Economic weakness in leading economies will limit the short-term performance of emerging nations, Blanchard asserted. A renewed U.S. slowdown would have a "not enormous, but nonetheless significant" effect on Asia.
Only in the medium term might there be a decoupling between emerging markets and G-7 countries, he said.
Asked if the G-20 should make exchange rates part of its agenda, Blanchard implied that it would not be a good idea. The "great structural change" implied by a reorientation toward internal demand within, for example, China, will take place in time and include a revaluation of the currency as one of "a multitude of measures," he said.
"It would be counterproductive to focus on the exchange rate; it is only one of the pieces of the puzzle," Blanchard said.