(Bloomberg) -- The International Monetary Fund said a triple threat facing the euro area has the potential to drag the economy deeper into a slump.
In its review of the region, the fund said growth “is expected to firm-up later this year but there are significant risks.” Current threats -- global trade tensions, a no-deal Brexit and fiscal positions in countries such as Italy -- mean the “central forecast is precarious.”
It also encouraged European authorities to take a tougher line on governments that aren’t controlling their budgets, saying better enforcement of the fiscal rules is “needed now.”
The IMF added that even without a major shock, the euro area “could experience a prolonged period of anemic growth and inflation.” That’s also a worry at the European Central Bank, which has extended its period of record-low interest rates and even begun discussions on what it might need to do if the situation worsens.
With euro-area inflation below the ECB’s goal, the IMF backed the continuation of loose policy and said even more easing may be needed. But it also warned that this could undermine financial stability and risk creating bubbles.
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