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IMF economist gives thumbs-up to German budget policy

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(Globalpost/GlobalPost)

The International Monetary Fund's chief economist says that Germany's budgetary policy is "appropriate" while criticising that of the United States, in an interview with a German newspaper to appear Thursday.

"I think the German budgetary policy generally speaking is appropriate, while the Americans are doing too much," Olivier Blanchard told Die Zeit according to a pre-released copy.

The US "should consolidate less at the current time but have a clear plan in order to do more in the future," the IMF economist said in the interview published in German.

Germany, on the other hand, should stick to its announced course of financial consolidation "and avoid saving more than planned", he added.

Germany's public deficit is expected to be around 0.5 percent of output this year, making it one of very few eurozone countries to respect European Union rules stating that countries in the single currency area may not run a public deficit higher than three percent of GDP.

According to the EU statistics agency Eurostat, a strong majority of all EU members, 17 of 27, exceeded the 3.0 percent limit last year.

But Blanchard said Germany would not be making savings this year.

"According to our calculations the state deficit, adjusted for cyclical effects, will slightly rise this year," he told the German newspaper.

Asked whether countries should save "at any cost", Blanchard said "I didn't say that", adding it was important to "leave the danger zone" which meant budgetary consolidation.

However he said that was a burden in the short-term on economic growth.

"Therefore we must look closely at each country and decide what rate of consolidation is appropriate," he added.

Berlin has come under pressure to back a less austere approach to the economic crisis that countries such as France say would promote growth.

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http://www.globalpost.com/dispatch/news/afp/130424/imf-economist-gives-thumbs-german-budget-policy