News+ interview For more insight, euronews spoke to Jörg Decressin, Division Chief of the IMF's European Department. Stefan Grobe, euronews: "We have seen calm return to markets, as eurozone governments have taken more steps on budget tightening and fiscal reforms. Is the worst of the euro crisis behind us or could the situation in Spain and Italy escalate the crisis again? Jörg Decressin: "The risks continue to remain quite elevated. In our World Economic Outlook we actually have a downside scenario that explains how a reintensification of risks would affect the euro area as well as the rest of the world. And it shows that, if there was a re-intensification of the crisis, many countries would suffer." euronews: "There is the risk of strong spillover effects to the rest of Europe and beyond. What is the narrative here? Is the eurozone dragging the global economy down?" *Jörg Decressin:* "There are several channels through which the euro area crisis are spilling over to the rest of the world. First, many European governments are implementing strong fiscal consolidation plans. These are necessary, but they are also reducing growth in the short term and therefore are reducing imports by the euro area from the rest of the world, and thereby affecting growth elsewhere. Second, banks in Europe are also trying to rebuild capital and cut back on credit and other assets. And so they are selling assets elsewhere in the world, they are reducing credit growth elsewhere in the world, in order to improve the quality of their long-term portfolios. And this is also weighing on growth in rest the world." euronews: "Give us a progress report on Greece and Portugal. Do the joint EU/IMF programmes work? What is the impact on the real economy in these countries and on the growth prospects? Jörg Decressin: The programmes work. The situation is still quite challenging in Greece. In Portugal the programme is moving ahead quite smoothly. The successes of the programmes can be seen in various indicators. First, you are seeing that the fiscal deficits of these countries are coming down quite appreciably, second you are seeing that inflation in these countries is coming down quite apppreciably and third, you are seeing that their current account deficits are coming down quite appreciably." euronews: "Much of the burden of supporting growth falls on monetary policy. Should the ECB inject more funds into the financial system to address banks" funding and liquidity problems - even if the Germans are against it?" Jörg Decressin: "The ECB's policies have been absolutely decisive. Particularly the so-called Long-Term Refinancing Operations that they have deployed. We believe that the ECB needs to stand ready to deploy such operations again, if and when needed. They also need to stand ready to intervene in bond markets with a view to maintaining orderly conditions and thereby facilitate the pass through of the monetary policy to the real economy.