Some countries on the periphery of Europe could take a decade to return to a normal growth trajectory after they face a “very tough” period of fixing their budgets, said IMF chief economist Olivier Blanchard.
“It is very clear that the adjustment process that these countries will have to go through, both on the macro and the fiscal side, is not going to be over in three years or in five years, it will probably take 10 years until these countries actually get back to health,” Blanchard said today in a speech at an economics symposium at the Massachusetts Institute of Technology in Cambridge, Massachusetts.
Blanchard was discussing the outlook for “peripheral Europe” a set of countries he identified as “surely Ireland and Greece, and Portugal and Spain being not very far from it.”
The steps needed to fix budgets will not be easy, he said. “The initial period is going to be a very tough one,” Blanchard said. “It’s going to be one of fiscal consolidation in an adverse environment, probably with negative growth, which we’re seeing.”
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