IMF’s Kammer says tariff drag could overshadow Eurozone growth despite German fiscal boost

Alfred Kammer, director of the European Department of the International Monetary Fund (IMF), said the increased expenditure in German infrastructure would boost European economic growth in the coming years – but it wasn't enough to overcome the dragging expectations from US tariffs.

Kammer Says The recently approved multi-billion economic stimulus package in Germany is not enough to be more than expected to drag from US tariffs. He added that the IMF has a very clear recommendation for the European Central Bank (ECB), noted that to this day, there has been a huge success in the efforts of disinflation and financial policy has worked – so the IMF is hoping that the eurozone will continue to hit 2% of inflation targets in the second half of 2025.

Kammer said the IMF's recommendation for the ECB has a room for another 25 points basis cut on the tag, and then the ECB must hold a 2% policy rate unless the major shocks hit and there is a need for re -developing financial policy.

Kammer said increasing spending in Germany could not offset the US tariff drag

According to Kammer, Germany's recent infrastructure will only eliminate the negative impact of “partial,” which will boost growth in the euro area over the next two years.

However, IMF's European Department Department Oya Celasun said on Friday that Germany's fiscal expansion would boost its economy starting in 2026 to reduce the increasing drag from US tariffs after years of vulnerable growth.

Celasun told a panel during IMF and World Bank Spring meetings in Washington that he did not expect Germany to spend increased. However, he pointed out that this was a dominant factor in the ongoing drummer from trading tensions as “we moved to 2026 and 2027.”

Kammer told CNBC's Carolin Roth at an interview at IMF-World Bank Spring meetings last week that tariffs and trade tensions weighed in the view of euro area growth rather than the positive effects on the fiscal side.

The IMF cut off eurozone growth forecasts for each other in the next two years by 0.2 percent points, up to 0.8% to 2025 and 1.2% in 2026.

“What we see is that we have a significant collapse for the advanced European economies … and for emerging countries in the Euro area that have doubled for these two years.”

–Alfred KammerDirector of the European Department in the International Monetary Fund (IMF)

Kammer also suggested that the ECB should cut interest rates by a quarter percent point only once this year, despite the risk of growth. The ECB has until now reduced rates seven times in quarter-percent-point increases, beginning June 2024. The latest cutting rate in April took the deposit facility up to 2.25%.

IMF praises German multi-billion fiscal stimulus package

IMF director Kristalina Georgieva said on April 24 that the global economy was entering a “new era,” praising what he described as “impossible” changing policy in Germany, Britain, and Argentina.

The IMF especially praised special funding for infrastructure, stating that the package is likely to boost growth in the near term and also has a long -term impact. German Parliament approved plans for a massive spending spending, which discarded decades of fiscal conservatism in hopes of reviving economic growth and military spending. The stimulus package will allow investments in defense, transportation, energy grids, schools, sports facilities, and climate protection.

The IMF urged Germany to start with reforms, emphasizing that the most important thing is to cut off red tape so that special funds can achieve its entire effect. Funds also insist that Germany should help more women work in full time.

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