IMF urges Italy and France to spend less, Germany to loosen purse strings

WASHINGTON (Reuters) – Italy and France are expected to cut spending faster than currently expected to get debt under control, while Germany is expected to loosen its purse strings to boost growth.

This is what the International Monetary Fund (IMF) announced.

Finance ministers from all over the world have gathered in Washington in recent days to discuss and listen to experts from the IMF and the World Bank on topics ranging from budget policy, global growth and aid to the poorest countries.

Although the Fund’s advice is not binding on countries that do not receive its help, its latest reflections on Italy, France and Germany will likely bring back unpleasant memories of the debt crisis of the last decade.

“Advanced European economies with relatively high debt levels are expected to implement more significant and rapid fiscal consolidation than expected under current policies (for example, in Belgium, France and Italy),” the IMF said in its economic outlook for Europe.

The IMF’s head for Europe, Alfred Kammer, told Reuters in an interview that the Italian government should put an end to the Superbonus, an incentive he said was “inefficient” for home renovation, destined to be gradually eliminated by end of next year.

Kammer said France could instead get a “substantial revenue” by getting rid of energy subsidies launched after Russia’s invasion of Ukraine in 2022, Kammer added.

Finally, Germany has “fiscal space” to invest in digitalisation and public infrastructure and to support business research and development, Kammer added.

Earlier this week, the IMF cut its growth forecast for the euro zone’s largest economy.

The Fund did not indicate how much Italy or France should reduce their respective deficits. In Italy the government expects a deficit of 4.3% of GDP this year, 3.7% next year and 3.0% in 2026, although Finance Minister Giancarlo Giorgetti has said that much will depend on new budget rules of the European Union.

(Translated by Laura Contemori, editing by Sara Rossi)