Transcript of a Press Briefing on the International Monetary Fund’s World Economic Outlook
By Olivier Blanchard, Economic Counsellor and Director of the Research Department, with Jörg Decressin, Assistant Director, Petya Koeva Brooks, Chief of the World Economic Studies Division, and Abdul Abiad, Senior Economist in the World Economic Studies Division
Wednesday, April 21, 2010
Washington, DC
QUESTION: In your analysis about recovery in Europe, Italy is not mentioned; is not interesting? Why? Italy's situation, Italy is with Germany and France, or with Greece, Ireland, Portugal and Spain?
MR. DECRESSIN: We would say that Italy is between France and Germany on the one hand, and Portugal, Greece, on the other. Let me explain.
Italy has a high debt ratio, and in that sense one might see it closer to Greece. On the other hand, it has a much lower fiscal deficit. It also has a much lower current account deficit, actually, a very small current account deficit. And, Italy has a much lower level of external indebtedness than Greece, Portugal. In that sense it is in a different category. It is not in the same category of Germany, because it does have the same low debt as Germany, and that puts it in a different light; it is the same vis-à-vis France.
MR. MURRAY: A question from the Media Briefing Center.
“Does the IMF consider the fiscal situation in Greece and Portugal a problem for growth in the euro zone in the next few years? And additionally to that, are more bailouts needed in the euro zone?”
MR. DECRESSIN: If you look at the importance of Greece and Portugal for the trade of its partners in the euro area, it is much smaller than that of the rest of the world. So, Europe's fate will be much more closely linked to what happens in the rest of the world than what happens in Greece and Portugal. Here, I would add, however, for as long as what is happening in Greece and Portugal is handled appropriately. And that is what we expect.
In terms of what is needed, both of these countries face a challenge to significantly adjust their growth from domestic to external demand, and to roll back large fiscal deficits. And, the plans for that are being put in place. And therefore, we don't see major risks for the euro area from these two countries in our forecast.
