Ease off on austerity, IMF warns Chancellor George Osborne

This sounds like it’s too little, too late. ~J

George Osborne has been warned by the International Monetary Fund that he risks further damaging the economy unless the pace of austerity slows and he faces up to the country’s “growth challenge”.

Chancellor George Osborne addresses  the Conservative Conference at Birmingham's International Convention Centre

Chancellor George Osborne addresses the Conservative Party Conference at Birmingham’s International Convention Centre Photo: David Jones/PA

By Philip Aldrick, Emma Rowley and Roland Gribben
The Telegraph, UK

9:12PM BST 14 Oct 2012

David Lipton, the IMF’s deputy man­aging director, suggested the Chancellor may have to take bolder measures to ease the pain of cuts to spending and instead give higher prio­­rity to rescuing the flagging economy.

“Our view has been that doing nothing is not a good answer given the problems that could arise when very, very low growth becomes entrenched,” Mr Lipton told The Daily Telegraph as the IMF and World Bank annual meetings in Tokyo wound down.

He also said the Bank of England should look at being more inventive in the way it used quantitative easing to aid recovery by buying assets other than gilt-edged securities.

His strictures reflect a more critical IMF view about the government’s debt reduction programme. The tone has recently changed and is being echoed in a loss of confidence among Britain’s business leaders.

But inside the Treasury there is irritation that the IMF has been slow to recognise policy shifts to stimulate growth. Last year the Chancellor extended the £123bn deficit reduction programme by two years to 2017 and Mr Lipton expects Mr Osborne will be forced to repeat the exercise and lengthen the extension.

He said: “This is a challenge that doesn’t necessarily go away. Going forward there’s a need to keep an eye on this subject.”

Vince Cable, the Business Secretary, yesterday acknowledged that the government’s biggest challenge over the next year is balancing the need to stimulate growth while maintaining confidence in the money markets about the debt programme.

“We started off aiming to deal with the structural deficit in four years and we’ve now said we’ll deal with it in six because the economy has slowed down making it more difficult,” he said during a debate at the Cheltenham Literature Festival.

Last week the IMF slashed this year’s growth forecast for Britain by 0.6 percentage points – the biggest downgrade for rich nations – and said the economy would contract by 0.4pc. Next year’s growth prediction has been cut from 1.4pc to 1pc.

Mr Osborne arrives back from the IMF meeting to a more optimistic forecast today from the Ernst & Young Item group. It expects growth of 0.7pc in the third quarter this year to limit the full year downturn to 0.2pc and is looking for a housing market recovery to help the economy grow by 1.2pc next year.

But it added that it still involves the “wrong kind of growth”, relying not on exports as hoped but on consumer spending and a recovery in the housing market, and there are mixed indicators from other surveys released today. Lloyds TSB says the squeeze on spending power resulting from the inflation rate outstripping pay rises has deepened with consumers having around £100 less than a year ago to buy non-essentials.

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3 Responses to Ease off on austerity, IMF warns Chancellor George Osborne

  1. Nora says:

    Hmm. Something is in the air but I’m not sure what yet. Fwiw, Osborne is a Bilderberger.

  2. Roberto says:

    The whole idea of debt has been pushed by the international banks since day one, i.e., Sumeria. Get a country to go to war, which they can’t afford because it doesn’t produce any return, and loan them money. In the old days, the victors looted the towns and took slaves and that helped balance the expenditure of energy, but in the modern day that is not done, well, at least it’s not advertised openly.

    The bankers promote endless wars because it brings them huge profits. That is how they were able to take over the world – one war at a time. And in these modern days of multitasking we have multi-wars and multi-profits for the bankers.

    Do away with banks and wars will come to a dead stop. Common sense says it’s non productive to borrow money to fight a war, when there is no return from it. And people would settle there differences more readily if there were no third party stirring up the hornet’s nest because they have in interest in the outcome – divide and conquer.

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