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José Luis Álvarez Arce, Director of department of Economics, University of Navarra

The Analysis. A bleaker outlook

Wed, 21 Sep 2011 08:53:51 +0000 Published in La Razón (Madrid)

Has the IMF changed its interpretation of the state and future prospects of the world's Economics ?
Without a doubt; and it has done so to take a more pessimistic stance. Its new forecasts are a clear revision to leave of the growth projections that were made just half a year ago. Although it warned then of the presence of risks, these seem to have multiplied in recent months. The reasons are varied: from the insufficient correction of existing imbalances, to the worsening and contagion of the crisis in the sovereign debt markets, to the relapse of a still convalescent banking sector.

What is the analysis of the complicated situation in the Eurozone?
As has been the case throughout the crisis, and according to IMF forecasts, it is the developed countries that will once again lag behind in the coming months, with a very sluggish recovery, compared to the dynamism of the emerging and developing economies development. In this regard, the diagnosis is particularly worrying for the euro zone, whose growth is expected to barely exceed 1% in 2012. The Fund's prescription for tackling status is clear, but includes a treatment that is difficult to administer in its exact dosage. It calls for the public accounts to be brought back on track quickly enough to be credible, but slowly enough so as not to suffocate the patient. Simple in theory, complicated at internship

And what about Spain?
The Fund is not optimistic. It forecasts a growth of 1.1% in 2012, as opposed to the 2.3% that the government expects. It also paints a gloomy picture in terms of unemployment. I believe that these poor prospects, in view of the IMF's general recommendations for Europe, should be interpreted as an invitation to undertake serious structural reforms. Among them, I would highlight that of the labor market. Greater budgetary stability and financial restructuring will not be enough. We need these structural policies to stimulate demand and supply in a way that is compatible with the establishment of a solid and sustainable growth model .