NUSA DUA, Indonesia (Reuters) - Too many euro zone countries are missing the opportunity to reduce debt now, when economic growth is good, to prepare for the next economic downturn, the head of the International Monetary Fund’s European department Poul Thomsen said.
“Fiscal policy has been insufficiently counter-cyclical,” Thomsen told a news conference at the IMF’s annual meetings in Bali, Indonesia, noting this was his main message the Europe.
He said those countries were actually increasing their nominal budget deficit, despite the economic good times.
He did not name Italy specifically, but made a clear reference to it by saying that highly indebted countries in the euro zone were of particular concern, because once the downturn came, the lack of fiscal space to counter it could result in a recession.
“They need to reduce debt during the good times to have space during the bad times,” Thomsen said.
Reporting By Jan Strupczewski and Francesco Canepa