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Friday signaled the start of spring meetings for the International Monetary Fund (IMF) in Washington D.C. that’s primary focus will be Greece and its projections of modest growth. This comes after it was released last week that all of Europe, including Greece, saw significant increases in trade surplus this year in addition to the euro reaching a 12-year low against the dollar. This economic slowing is not just felt within Europe though. The U.S. also reported a hit to its stocks and bonds last week, which does not provide room for optimism in the coming negotiations.
Last Friday, director of the European department of the IMF, Poul Thomsen explained that the growth projections that have been calculated for Greece have been overly ambitious and will need to be dramatically scaled back for any recovery program to succeed. Two reasons he provided for the need to scale back growth are: first, the economic turmoil that is being seen in Europe and second, because there have been numerous delays in completing the review of the Greek situation.
This call from meetings in Washington to reform the recovery process in Greece comes after the IMF provided estimated growth for the nation early last week at 2.5 percent in 2015 and 3.7 percent in 2016. It has been this type of overzealous economic projection that has put Greece in a position with little room to move in the past, which is something Greek Finance Minister Yanis Varoufakis is trying to avoid this week during the IMF meetings in Washington. Varoufakis, a charismatic Greek economists gaining popularity, has stood defiant in the face of plans to reform that will lead to further economic turmoil. He has said, “We’ve tried that medicine but it hasn’t worked.”
The European trade surplus also rose this year from $15.3 billion dollars last year to $21.5 billion. Within the EU there has also been unusually low inflation that could potentially inhibit consumer spending. The projection of modest growth by the IMF in Greece has been reiterated by the European Commission’s vice president for the euro, Vladis Dombrovskis, who communicated on Thursday that while the economic recovery is currently very slow, it will continue to increase over time. He has also pointed out that this slow rate of inflation is being caused primarily by external factors like the fall in oil prices globally. He notes, that this dip in oil price will not last forever which means the inflation issue should eventually “correct itself.”
The IMF projection of modest growth in Greece, comes after meetings in Washington, yet is being seen as an important step in the economic recovery of not only in Greece but also Europe. Greece is seen as one of the first places to be hit very hard if Europe’s economy were to slump further into a depression. So, curing the problem there would prove a significant sign that growth is back and that it will continue. However, currently Greece is still asking for delays in loan repayment, something that some say has not really happened with a nation with an developed, albeit struggling, economy. The IMF, in its spring meetings, is faced with what is becoming a continuing problem in Greece and all of Europe.
By Joel Wickwire
Photo by Glyn Lowe – Flickr License
Photo by Mr.TinDC – Flickr License