IMF: Eurozone is weak, risks falling into deflation

An International Monetary Fund (IMF) report released Monday warns the Euro area to repair bank balance sheets, step up reforms to boost jobs and the European Central Bank (ECB) to move forward a quantitative easing.

According to The Guardian, IMF has warned the ECB that the eurozone recovery is weak, its financial markets too fragmented, and the region risks falling into deflation.

The IMF urges its European members to shore up the single currency bloc, including repairing bank balance sheets and stepping up reforms to boost employment.

“The recovery is weak and uneven. Inflation has been too low for too long, financial markets are still fragmented, and structural gaps persist: these hinder rebalancing and substantial reductions in debt and unemployment,” said the report..

On a more positive note, the IMF said euro area recovery was taking hold and that action by national politicians and the ECB had helped boost investor confidence.

“But the euro-skeptic outcome of the European elections posed risks to the single market and the economic recovery was neither robust nor sufficiently strong,” the report cautioned.

The Guardian

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