Top IMF official predicts quick turnaround for Irish economy
Restoring country's competitiveness is the key plank in recovery programme, says new Europe director
The Irish economy will turn around "relatively quickly'' once the country's competitiveness is restored, the IMF's most senior European official has predicted.
The IMF programme -- agreed in December -- is based in large part on improving competitiveness by reducing unit wage costs, opening up sheltered parts of the economy and privatising certain state services.
Antonio Borges, the IMF's new director of Europe, also said countries like Greece and Ireland would benefit from broader recoveries in other major economies.
"Countries such as Greece and Ireland are relatively small countries, which can benefit from overall economic recovery, and grow fast provided they are able to reallocate resources quickly,'' said Mr Borges.
"Once these countries have a programme in place to rebuild competitiveness, we can expect their economies to turn around relatively quickly,'' he added.
He was speaking in an interview released yesterday by the Washington-based organisation. He said Germany had the potential to pull along other economies, but it was not the only country performing well in the current environment.
"Germany is, of course, the biggest economy in Europe, but there are many other economies in Europe that are doing well -- some of them very well. All the Nordic countries are recovering, as are the Netherlands and Austria. France's economy is also robust.''
He said countries with large budget deficits had to do something about them now, not later.
"At the other end of the spectrum, you have countries that are in a short-term crisis.
"They have no choice but to be extremely serious about their fiscal policies, even though that is not the only policy they should apply. But they certainly cannot abandon their goals.''
He also added that countries could restore their competitiveness despite the pain of adjustment. "It may not be easy, but it's not impossible. Germany is a case in point. The country lost competitiveness at the time of unification, and has since managed to recover it through focused policies.''
Asked about the eurozone debt crisis, Mr Borges was more circumspect.
"We welcome the steps the European Union has been taking to resolve the crisis. And they have indicated that they will put more ideas on the table soon. Most importantly, the countries affected by the loss of confidence have to return to a credible growth path quickly. That involves an extraordinary effort to restore competitiveness,'' he added.