THE FUTURE of euro currency and the entire EU project looks unsustainable without major change, according to a damning review by the International Monetary Fund and renowned economists.Alrighty then.
IMF chiefs warned the UK's decision to leave the EU would seriously hamper growth prospects in the region.
Before the Brexit vote, the IMF forecast a 1.7 per cent expansion for the eurozone.
However, post Brexit the organisation revised that down to 1.6 per cent this year and 1.4 per cent next year....MORE
Here's the IMF press release:
Euro Area At The Crossroads: No Time For Complacency
July 8, 2016
- Euro area in recovery but medium-term outlook weak
- Collective action needed for further integration; muddling through carries heavy risks
- Priorities: more EU fiscal support, reforms to raise growth potential, a common deposit insurance, improve bank balance sheetsRecovery in the euro area has strengthened, but the medium-term outlook remains weak and is endangered by a lack of collective action to address common challenges. Members must rebuild faith in the monetary union, says the IMF in its latest review of the currency union.“The euro area is at a critical juncture. The progress made during the acute phase of the crisis and the recovery should not lead to complacency about the underlying challenges. Policymakers should seize this moment to reverse the rising tide of Euroscepticism and strengthen the monetary union by acting together. Muddling through is increasingly untenable,” said Mahmood Pradhan, mission chief for the euro area.
The fragile recovery that started in the euro area in 2014 has strengthened on account of consumer spending as more people find jobs, lower oil prices, a neutral fiscal stance, and accommodative monetary policy. However, medium-term growth prospects remain less bright. “Inflation remains too low, and weak investment, still high unemployment, and the aging of the population will continue to hurt productivity, raising the risk of stagnation,” said Pradhan.
Political risks rising
The subdued economic outlook is exacerbated by rising political risk in the euro area and the European Union (EU). Growing Euroscepticism has led to stark political divisions, which hinder a collective will to take crucial decisions for a stronger union—to deal with the refugee surge or address security concerns, for example. The recent United Kingdom referendum is likely to lead to persistent uncertainty regarding its new status vis-à-vis the EU. A slowdown in global growth could also undermine the recovery and raise the likelihood of stagnation.
Restore faith in the monetary union
Unless collective problems are resolved, the euro area is likely to suffer repeated bouts of economic and political instability leading to crises of confidence and economic setbacks. The EU should redouble efforts to ensure the benefits of economic integration and thus rebuild flagging faith in the monetary union. Countries should rapidly integrate refugees into their labor markets, while the block should reform its common border and asylum policy to protect social cohesion and preserve the single market....MORE