IMF clashes with Germany over best path to economic recovery

City A.M. Reporter
THE IMF yesterday warned Germany against being overly ambitious in consolidating its budget given risks to growth in Europe’s largest economy, which has not decoupled from the rest of the Eurozone.

The International Monetary Fund, which kept its forecast for 0.3 per cent German growth this year, said it welcomed Berlin’s modest loosening of fiscal policy to boost domestic demand. That is seen driving expansion in the traditionally export-led economy.

However, it also said proactive fiscal policies “would be needed” if growth prospects soured. Some IMF directors already saw scope for more stimulus.

Meanwhile Peer Steinbrueck, Angela Merkel’s main challenger in next month’s German election, criticised the ECB’s pledge to keep interest rates at record lows for an extended period, saying the move put savers in an “unspeakable situation”.