IMF urges Germany to rebalance economy
(WASHINGTON) - The IMF on Tuesday said that Germany's prospects for economic recovery look "favourable" but urged the country to do more to rebalance European growth and end the continent's debt crisis.
After talks in Berlin, the International Monetary Fund issued a statement warning that Germany remains vulnerable to the problems roiling southern Europe, even if its domestic economy was solid.
"The conditions are in place in Germany for a domestic demand-led recovery" after a slowdown late last year, the IMF said.
But deeper crises in Greece, Spain, Portugal or Ireland "would spill over into Germany directly through real and financial channels."
The IMF said Germany could do more to help address the structural imbalances that have foreshadowed the crisis by deepening its own reforms.
For decades Germany's growth has been built on the success of its exports, making it heavily reliant on consumers in places like Greece.
The IMF encouraged Germany to seek out more "domestic demand-led growth."
"(The) reduction of imbalances in the euro area would be helped by the natural rebalancing of Germany's economy," the Washington-based Fund said.
The IMF also called on Berlin to help in "articulating more clearly the Economic and Monetary Union's shared vision of the post-crisis architecture," in order to boost market confidence.
Germany has become a reluctant saviour for debt-wracked European nations, offering the bulk of cash for European Union bailouts but rejecting some wide-reaching reforms to monetary and fiscal policy that involve broader burden sharing.
The rescues are deeply unpopular in Germany, leading to taxpayer resentment that often appears poised to spill over into the political sphere and poison joint European efforts to tackle the crises.
The IMF stressed the risks for German banks inherent in the crisis.
It is "important to ensure that risks from the global activities of large banks are fully understood and internalized."
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