According to Alfred Kammer, director of the European Department at the International Monetary Fund, high German infrastructure spending will promote Europe’s economic growth in the coming years – but is not enough to draw the expected from the American tariff.
IMF cut its development approach to the Euro sector last week, as well as downgrade We, UK And Many Asian countries Due to President Donald Trump’s unstable tariff policy.
The institution cut down 0.2 percent marks for the development of its euro sector for each of the next two years, 0.8% in 2025 and 1.2% in 2026.
“It is tariff and business tension that weighs on the approach rather than positive effects on the fiscal side,” Kammer last week told CNBC’s CNBC’s CNBC Caroline Roth in an interview.
“What we see is that we have a meaningful downgrade for Europe advanced economies … and doubled for the countries of the emerging Euro region this two years.”
The negative effect of the tariff will be slightly offset Germany’s recent infrastructure expenditure billWhich will promote the increase in the euro region in those two years, Kammer said.
Rebate passed for Germany Debt law High defense spending is unlocked and capable of manufacturing infrastructure and climate funds of 500 billion euros ($ 548 billion). This step has been Economical The largest in the euro region – as a potential “game changer” for a dull economy.
However, optimism is shaken by the American tariff, which is widely expected Global development and trade flow,
Many policy makers in European Central Bank Told CNBC last week While the path of inflation appeared positive – to potentially further inflation with tariffs – their comprehensive approach was now quite more uncertain.
Commerce of IMF said that ECB should only cut interest rates once this year, despite the risk of growth, by a quarter percentage points.
The ECB has reduced rates by seven times so far in the quarter-point growth starting in June 2024. Its most recent step in April made the deposit facility, its major rate to 2.25%.
“We have a very clear recommendation for ECB. What we have seen so far is a big success in disintegration and monetary policy has worked … So we are hoping to constantly hit the target of 2% inflation in the second half of 2025,” Kammer told CNBC.
He said, “Our recommendation is that there is a place for another 25-base-point cut in summer, and then ECB should hold that 2% policy rate until big shocks collide and need to re-prepare monetary policy,” he said.
On Monday, the overnight index swap pricing pointed to the market expectations for two more quarter-bind deductions this year.
