IMF Warns U.S. Tariffs May Outweigh German Fiscal Boost for Eurozone Growth

Alfred Kammer, the IMF’s European department director, delivered a sobering assessment of the Eurozone’s economic outlook. While Germany’s multi-billion infrastructure package will provide some stimulus, Kammer emphasized it won’t counterbalance the drag from escalating U.S. tariffs. The fiscal boost resembles pouring water into a leaking bucket—visible progress, but fundamentally compromised by external pressures.

On monetary policy, Kammer struck a cautiously optimistic tone. The ECB’s disinflation efforts have achieved ’huge success,’ with the IMF projecting sustainable 2% inflation by late 2025. This creates room for policy adjustment, though Kammer stopped short of specifying whether this implies rate cuts or balance sheet normalization. The delicate balance between supporting growth and maintaining price stability continues to define the Eurozone’s policy dilemma.