Restoring Growth Key Priority for Europe

Recovery in Europe's largest economies can help propel growth in wider region

Greater focus on competitiveness needed

Deeper financial integration would hasten recovery

Borges also noted that freeing up capital flows, through deeper financial integration, could provide powerful solutions to some of Europe’s deep-seated problems, by speeding up the reallocation of resources.

Borges joined the IMF in December 2010, leaving a position as Chairman of the Hedge Fund Standards Board in London.

IMF Survey online: How solid is Europe’s recovery? Can strong growth in Germany pull along the rest of the euro area?

Borges: There is a high likelihood that this will happen. 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. The outlook is less certain in Britain, but we are confident that it too is on the right track.

In emerging Europe—in Poland, for example—there is good economic growth as well, and even the Baltic countries, where the downturn was most severe, are showing signs of recovery. The IMF is now predicting growth of 3.6 percent for central and eastern Europe in 2011.

IMF Survey online: Has Europe’s financial system undergone sufficient repair to support growth?

Borges: Obviously, the financial system is one of our main concerns, and all of us, not just in the European Department, but in the whole IMF, are focusing on strengthening the financial system, in particular the banking system. Big challenges remain.

Antonio Borges is the IMF’s new Director for Europe. He brings a mix of private and public sector experience to the job (photo: IMF)

On the one hand, as everybody knows, we still need to work through the sovereign debt crisis and address the systemic risks associated with it. On the other hand, there is, in parallel, a real revolution in terms of the new regulatory framework that is being implemented by the European Union. It’s hard to predict exactly what impact this will have on the financial system in Europe. But it will be far-reaching.

Clearly we need the financial system, and the banking sector in particular, to go back to its normal function of supporting economic activity and channeling savings to investment. All of this is now reverting back to normal, but at a pace that could be reversed if there were to be...