IMF says euro area should become more resilient before the next recession hits
IMF says euro area should become more resilient before the next recession hits

Eurozone growth remains frigile amid mounting risks: IMF

ANI | Updated: Jun 17, 2019 18:17 IST

Washington D.C. [USA], June 17 (ANI): Growth in the eurozone rebounded earlier this year but it remains fragile while risks have increased, the International Monetary Fund (IMF) said on Monday.
Euro area countries have had more frequent and severe recessions than other advanced economies over the past 20 years, it said in a blog post written by Shekhar Aiyar, John Bluedorn and Romain Duval.
"An even greater cause for concern is that differences between member countries' growth and unemployment rates after euro area-wide downturns have widened. This widening was most stark following the 2008 global financial crisis."
While euro area countries have made substantial progress in improving fundamental aspects of the economic and monetary union since then, they have more to do -- from completing the banking and capital markets unions to establishing a central fiscal capacity for macroeconomic stabilisation.
But euro area-wide architectural improvements cannot fully substitute for the economic flexibility provided by national structural reforms. These also have a vital role to play.
"Our findings show that improvements in national labour market policies, product market regulations and corporate insolvency regimes will make economies more resilient, and reduce the economic and social costs of adverse shocks. This will enable the euro area to fare better in the event of a major shock," said the IMF post.
For euro area economies to be more resilient, they need to be able to weather temporary shocks, such as a credit crunch or supply disruption. They also need workers and capital to move into their most productive uses more swiftly in the wake of permanent shocks, such as a long-lasting loss in the external competitiveness of domestic industries.
Labour and product market regulations can help on both fronts, said the IMF. Over the past four decades, deep recessions resulted in smaller and less persistent output losses in those economies that had reformed their labour and product market regulations, compared with those that had not. (ANI)