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IMF Upgrades Euro Zone Growth Forecast

The International Monetary Fund has revised its growth forecast for the euro zone to 2 percent, up from 1.6 percent, despite persistent concerns about the peripheral countries.

John Lipsky
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John Lipsky

"There are some things that are going right," IMF acting Managing Director John Lipsky told CNBC. "Growth in the core economies is relatively solid and strong right now, but there is still in the medium term a very pressing need to improve both the stability and resilience and especially growth potential of the euro area economy."

There is "broad convergence" on governance measures, including the stability and growth pact, an agreement to maintain sustainable budget deficits and national debt, Lipsky said.

Financial sector initiatives, including the creation of the Systemic Risk Board, a new regulatory authority for the euro zone, and the bank stress tests are also improving the performance of the region, he added.

"There are still a whole series of concrete measures that would make the single market a stronger, more effective and more efficient reality, and would produce stronger results all around for the benefit of all members of the European economy. Those are the kind of measures that are very concrete, specific and very achievable," Lipsky said.

As the Greek parliament prepares for a vote of confidence in a new cabinet following a reshuffle last Thursday evening, there is uncertainty over whether the country's government will be able to implement the austerity conditions attached to its IMF/European Union bailout package.

"There is conviction all around that it is necessary to avoid any kind of so-called credit event or credit downgrade that would result from the process of any kind of adjustment of the existing debt terms," Lipsky said.

"That is in broad agreement, that that outcome should be avoided, and naturally there is discussion on how exactly to achieve that end. The discussions have, in fact, moved forward substantially. There seems to be agreement on a way forward that will be pursued directly," he added.

Lipsky would not be drawn into the speculation that Greece may look to leave the European single currency as part of its crisis recovery plan.

"Right now we're very focused, working with our European partners and the Greek authorities on implementing a very specific set of economic measures that are very ambitious and would put the Greek adjustment program on track, restore the competitiveness of the Greek economy and create a more stable and much more prosperous future for Greece and its partners," he said.

"The focus right now is making a success of the current program. And that, of course, is well in the euro area, in the euro-area economy and in the single currency."