Higher German infrastructure expenditure will stimulate the economic growth of Europe in the coming years – but not enough to fill the expected drag of American rates, according to Alfred Kammer, director of the European department of the International Monetary Fund.
The IMF reduced its growth output for the euro area last week, and also made downgrades for the US, the UK and many Asian countries due to the volatile tariff policy of President Donald Trump.
The institution reduced the growth reasons for the euro area for each of the following two years by 0.2 percentage points to 0.8% in 2025 and 1.2% in 2026.
“It is the rates and trade tensions that weigh on the prospects instead of the positive effects on the public prosecutor,” Kammer told CNBC’s Carolin Roth last week in an interview on the IMF-World Bank Spring meetings.
“What we see is that we have a meaningful downgrade for European advanced economies … and for the emerging countries, emerging countries double so much during this two -year period.”
The negative impact of rates will be somewhat compensated by the recent invoice of the recent infrastructure expenditure of Germany, which will stimulate growth in the euro area during those two years, Kammer said.
Example of assumed to the long -term debt rules of Germany have unlocked higher defense expenditure and creating 500 billion euros ($ 548 billion) Infrastructure and Climate Fund possible. The move was described by economists as a potential “game change” for the slow economy – the largest in the eurozone.
However, optimism has been shaken by American rates, which are experienced a lot to dampen global growth and trade flows.
Various policymakers at the European Central Bank told CNBC that although the inflation path seemed positive – with rates possibly brought the inflation in the block further down – their broader outlooks were newly more susceptible insecure.
Kammer from the IMF said that the ECB should only lower the inner rates again this year, with a quarter -time percentage, the growth risks of Liss.
The ECB has so far reduced seven times in a quarter percentage increases, starting in June 2024. The most recent step lower in Prinil took the deposits, the most important rate, to 2.25%.
“We have a different clear recommendation for the ECB.
“Our recommendation is that in the summer there is room for another 25-base-point reduction, and the ECB should contain that policy percentage of 2%, unless large shocks strikes and there is a need for re-calibrating monetary policy,” I added.
Overnight index SWAP prices On Monday there will be on the market this year for the expectations of the market for two more quarter points.
