IMF Warns Spain Needs Monetary Easing to Support Growth

The International Monetary Fund said Tuesday that Spain’s economic recovery is likely to continue over the medium term, but further easing of monetary policy by the European Central Bank may be needed to support demand that remains fragile.

“Stronger policies by Spain’s European partners would help the recovery in both the euro area and Spain,” the IMF said in the latest regular report issued by its mission in the country.

The report joins a growing body of statements by international bodies, including the European Commission and the Organization for Economic Cooperation and Development, praising Spain’s recent economic reforms. These have allowed the euro zone’s fourth-largest economy to have one of the strongest recoveries of any in the monetary area after a recession stretching from 2008 to last year.

But like the others bodies, the IMF said more efforts are needed to ensure that sky-high unemployment drops significantly.

The IMF said a further decrease in borrowing costs for Spanish firms and households would support the recovery, and an easier ECB monetary policy would narrow spreads between such costs among euro-zone countries. The IMF also called for progress “toward a more ambitious banking union”–a long-cherished goal of Spain and other southern European countries, often resisted by Germany’s government.

via Marketwatch

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