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By Mirko Giordani
On the 1st of February, The Henry Jackson Society hosted Jeffrey Franks, Director of the IMF Europe Office and Senior Resident Representative to the European Union since March 2015, at the event “The Economic Future of Europe”. Mr. Franks has worked for the IMF for 24 years, with a particular focus on Europe and Latina America. The event was chaired by Mr. Jeremy Lefroy MP.
Mr. Franks began by highlighting the positive growth projections for the advanced economies, which are upwards confronting them with October 2017. This means that advanced economies are growing at a faster rate than in October 2017. Spain, on the contrary, has a downward projection, together with the UK. This means that both Spain and US are growing at a slower rate than in October 2017. Mr Franks continued with the analysis on how Eurozone recovery from the financial crisis lags behind other advanced economies. Despite this, Mr Franks depicted a positive scenario, because in general Eurozone reached and surpassed its pre-crisis GDP. Within the Eurozone, Mr Franks identified different trends. On the one hand, countries like Germany or France reached and surpassed their pre-crisis GDP relatively quickly. On the other hand, Mediterranean countries such as Italy or Spain continue to suffer a slow economic recovery.
Next Mr Franks emphasised that these countries like Greece or Italy, which have a large amount of Gross General Government Debt to GDP, now have the best opportunity to reduce and restructure the debt. In fact, Mr Franks suggested that low interest rates, thanks to ECB monetary policies, can be crucial in helping to reduce debt. Another difficulty that Eurozone countries are facing is the great amount of Non-Performing Loans (NPL), which skyrocketed since the start of the financial crisis in 2007. Mr Franks stressed the fact that in the last three years, the amount of NPL is gradual but slowly reducing in the Eurozone. Mr Franks highlighted that Eurozone investment flows continue to be below the pre-crisis levels, when countries like Japan, UK and US are performing very well.
In the end, Mr Franks focused his attention on the long-term challenges that advanced economies will face.