03-Jul (Bloomberg) — The International Monetary Fund urged Germany to work with its European partners to “address the challenges” posed by the crisis in the 17-nation euro area.
The German economy, Europe’s largest, has had a “sharp rebound” in growth and is poised to recover in the face of the drag of the debt crisis, the IMF said in reports released today in Washington. That recovery is at risk if the crisis spills over into Germany’s economy and financial system, the IMF said.
“The main priorities in the period ahead will be to manage the transition to domestic demand-led growth, secure financial stability, and address the challenges posed by the euro-area crisis in conjunction with European partners,” according to the IMF.
German Chancellor Angela Merkel has pledged her full support to maintaining the euro common currency. At the same time, she has resisted proposals for debt-sharing in the form of euro bonds in the 17-nation area.
PG View: With the IMF warning that German growth will be just 1% this year and 1.4% next, the message seems to be that saving Europe will be in Germany’s best interest. I don’t think there is any question about that, but what’s going to be the cost — both economically and politically — in carrying that onerous burden? Nobody seems to have an answer for that…