Europe, the U.S., Japan and the U.K. “are not out of the woods,” and there is still “hard work” to be done for economic recovery, Bank of Israel Governor Stanley Fischer said today.
“You are looking at three very big economies and the U.K. which are not out of the woods,” Fischer said today in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland. “That means you had better not make any mistakes.”
While the concern which was felt a year ago that the euro area would break down has now gone, Europe is in a recession, and growth forecasts are being reduced, said Fischer, 69. The U.S., which “has a lot going for them,” still needs to get its fiscal situation under control, he said.
The euro crisis has shown signs of abating, with a report today saying German business confidence improved more than expected. Still, International Monetary Fund Managing Director Christine Lagarde said today this isn’t the time for Europe’s leaders to relax. The IMF cut its global growth forecast for 2013 to 3.5 percent from 3.6 percent on Jan. 23 and projected a second year of contraction in the euro region.
“Europe is in a recession and growth numbers are being reduced all the time,” said Fischer, a former deputy chief of the IMF. “We’re probably not facing the danger of a major blowup; we are facing the fact of a recession. And we’ll have to work to get out of it.”
In the U.S., restrictive fiscal policy will probably prevent the economy from reaching its 3 percent growth potential, Fischer said. Still, the probability that the economy will become energy-independent and the recovery in the housing and automobile sectors will help boost growth, he said.
A former economics professor at the Massachusetts Institute of Technology, Fischer was U.S. Federal Reserve Chairman Ben S. Bernanke’s thesis adviser. From 1988 to 1990, he was chief economist at the Washington-based World Bank. At the International Monetary Fund in the 1990s, he worked to resolve financial crises in Mexico, Russia and Southeast Asia. From 2002 to 2005, he was vice chairman of Citigroup Inc.
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