IMF Slams France, Germany, and Italy Over Stability Pact

by Ulrika Lomas, Tax-News.com, Brussels

01 November 2002

Speaking earlier this week, the IMF's eurozone director, Michael Deppler urged the 'big three countries'- Germany, Italy, and France - to abide by the rules of the European Union's Stability and Growth Pact.

Commenting on the International Monetary Fund's annual assessment of the eurozone economy, Mr Deppler explained that: 'The core of the problem is the fact that the three largest countries basically haven't lived up to the rules...the smaller countries all move from significant deficits to significant surpluses between '98 and 2002. Whereas, the three large countries essentially are back where they started from, with deficits in the 1.5 to 2 percent range.'

'By deficits here, we mean underlying deficits, not the cyclically affected actual deficits. So, in our view, the problems with the framework are not the framework, but the fact that the policies have not been in line with the framework.'

He added: 'The SGP is a sound framework but it has a credibility problem,' presumably referring to EC President, Romani Prodi's recent observation regarding the 'stupid' nature of the pact.

The IMF also revised downwards the region's 2002 growth forecast, predicting 0.75% growth for this year (down from 0.9% last month), and 2% for 2003 (down from 2.3%).

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