Trade war poses biggest risk to global stability: IMF

April 01, 2019 - Portugal

The US-China trade war poses the biggest risk to global stability and fiscal stabilisation is crucial to respond to macroeconomic shocks in Europe and improve the fiscal-monetary policy mix, IMF’s first deputy managing director David Lipton has said. Brexit is breeding uncertainty and the United States also needs to get its fiscal house in order, he said.

“In its absence, the euro area will remain over-reliant on monetary policy for stabilisation and too much of the burden of crisis response will fall on individual countries, with their ability to respond depending on each country’s fiscal space,” global newswires quoted Lipton as saying.

Lipton was speaking at a conference in Lisbon recently.

Each EU member state should ‘strengthen their defences ahead of a potential downturn’. These include countries like Italy that have not addressed ‘glaring vulnerabilities’, he said.

“A serious recession could be very damaging for these countries, because they will be shown to be ill-prepared,” he said.

“Their weaknesses could present a serious setback for Europe’s goal of convergence of standards of living, productivity, of national well-being,” he added. (DS)