The IMF announced that the COVID-19 pandemic is leading to severe socio-economic dislocations and hardship despite an unprecedented policy response in the Euro Area on Monday Nov. 30. The announcement came as part of the IMF’s Euro Area Staff Concluding Statement of the 2020 Article IV Mission.
“We see now a beginning of a recovery, the green shoots of recovery. They came in the third quarter after a very sharp contraction in the first half of the year. But economic activity still remains well below previous levels, and as you are very well aware, a new wave of infections is affecting negatively the momentum of this recovery.” Said Kristalina Georgieva, IMF’s Managing Director.
Georgieva urged governments not to withdraw fiscal support prematurely. She also strongly supported NextGen EU and the progress that has been made on the EU budget.
With the ongoing second wave in Europe, national fiscal policies will likely need to provide broad-based support for longer than initially envisioned, added Georgieva. Policies need to shift in the post-pandemic era where the focus must be on workers and young people coming into the labor force, while facilitating the exit of unviable companies.
“We are conscious that while there is some positive news on the outlook related to vaccines, there is also a great degree of uncertainty. And in that environment, there could be a downside scenario for which augmentation of existing EU level support may be necessary,” said Georgieva.
Georgieva concluded her statement by commending EU’s efforts to contain the pandemic and acknowledging that there is more work to be done especially for the future competitiveness of the Eurozone economies.