The International Monetary Fund (IMF) has publicly stated that Germany is vital to the future of the eurozone in terms of its lead role in tackling the financial crisis that has rocked the continent.
In its annual report on Germany, which has the biggest economy in Europe and the fourth largest in the world, the IMF commented that the country’s performance has been “remarkable despite facing incredible headwinds”.
Bearing this in mind, Germany now has a pivotal role to play in helping restore balance to Europe, the executive board of the IMF noted.
The board called on Germany to continue having a significant role in ongoing discussions with its European neighbours, which would help refine “the broader response” needed to finally resolve the ongoing problem.
While the ongoing malaise post-recession knocked economic activity in Germany during the last quarter of 2011, economic growth has subsequently picked up since the turn of the year.
This has been fuelled by a growing demand for its goods and services overseas, while increased consumer demand at home has boosted domestic trade.
Increased levels of international shipping arriving in Germany have helped the economic giant rebound after last year’s slight “blip”.
“There will be a natural adjustment of prices and wages that should help boost imports – that will go to some extent towards rebalancing for the euro area,” Subir Lall, the IMF’s mission chief to Germany, told the Financial Times.
The annual assessment, which is referred to as the Article IV Consultation, also observed that although the country’s banks have improved their operations, there are still some vulnerabilities that need to be addressed.
“They remain highly leveraged, dependent on wholesale funding, have low capital quality and profitability, and some institutions are significantly exposed to the euro area periphery,” the report stated.
“Some large international financial institutions have substantial cross-border operations, and significant counterparty risk exposures related to their large derivative portfolios.”
The report also commended the country’s robust commitment to creating jobs and the country now has an unemployment level of 5.3 per cent, which is a post-reunification low.
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