The IMF, whose managing director is Michael Camdessus,singles out industrialised Europe in general in the report - and the hard currency countries in the de facto mark zone in particular - as the main blots on an encouraging global economic landscape, of steady growth and mostly dormant inflation.
"The slowdown in Europe is largely behind us, and a pick up should be visible from the first quarter of 1996," Michael Mussa, director of the Fund's research department, said yesterday when presenting the latest issue of the Fund's twice yearly World Economic Outlook. It depicts a strengthening Japanese economy, modest but steady growth in the US, and a continuing surge in Asia - albeit at "only" 8.2 per cent this year, fractionally below 1995's 8.4 per cent.
The real laggard is the European Union, with projected expansion this year of just 1.8 per cent, a full percentage point below the Fund's prediction of just six months ago. The German economy is expected to grow just 1 per cent in 1996 and France 1.3 per cent. Growth in Britain is put at just over 2 per cent, lower than the 3 per cent talked of by Kenneth Clarke, the Chancellor.
Even so, the differences in performance between countries with currencies gravitating around the mark, and "devaluers" like Britain and Italy have been enough to revive the debate over exchange rate policy and growth. Britain's forced exit from the ERM in 1992 had brought an "an appropriate adjustment" in the value of sterling. "Should UK policy have been targeted to maintain a parity of DM 2.95 to the pound ?" Mr Mussa asked rhetorically. "That would have been exceedingly inappropriate."
Conversely, Germany comes in for criticism for its refusal to lower rates further and faster as the slowdown grew more serious last year. To facilitate a robust recovery in Europe now, the hard currency group must seize today's chance of reducing rates. With untypical bluntness, the report writes: "Room for further reductions in short term rates in these countries is suggested by their large margins of slack, subdued price pressures, the strength of their exchange rates and the slow growth of monetary aggregates."
But even the improvement the IMF expects for 1997, with European growth rising to 2.7 per cent, is unlikely to make much of a dent in unemployment. A further concern is uncertainties over the EU's plan for monetary union, which may have contributed to Germany's weak performance.
Indeed the Fund warns that the 1997 budget deficit targets may not of themselves be enough. It urges criteria linked to a longer period, and "binding commitments" beyond 1997.