WASHINGTON (Reuters) – France and Italy should cut spending faster than at the current rate to keep their debt levels under control, while Germany should spend more to support growth, the Fund said on Friday International Monetary Fund (IMF) in its regional economic outlook for Europe.
“Advanced European countries with relatively high debt levels should implement more ambitious fiscal consolidation than is currently envisaged by governments,” the Fund writes in its report, giving Belgium, France and Italy as examples .
Italy must dismantle “ineffective” incentives for energy renovation, the so-called Superbonus, which must be gradually phased out from the end of next year, Alfred Kammer, head of European economics at the Fund, told Reuters.
France could reap “substantial sums” by removing tariff shields put in place after Russia’s invasion of Ukraine, added Alfred Kammer.
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Germany, for its part, has the “fiscal space” necessary to invest in digitalization, infrastructure and support the research and development efforts of companies, the economist said.
Alfred Kammer believes that these efforts to control spending will send a “strong signal to the markets” and free up resources to finance long-term problems, including the aging of the population, climate change and an increase in military spending.
The IMF estimates that the costs associated with these issues will average 5.5% of GDP in Europe’s advanced economies by 2050.
(Reporting Francesco Canepa, Leigh Thomas in Paris, Gavin Jones in Rome and Maria Martinez in Berlin, French version Corentin Chappron, editing by Zhifan Liu)
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