Europe must break low growth cycle: IMF chief

19th November 2010, Comments 0 comments

The European economy must rid itself of a damaging cycle of low growth, the head of the International Monetary Fund said Friday, calling for countries to work together for a common strategy.

"Europe must break the shackles of low growth, and stop settling for second best," Dominique Strauss-Kahn said at a conference here.

"This is the only way to save the social model and fulfil the common European destiny. Europe has done better before, and it must do better again."

The "only answer," according to Strauss-Kahn, a Frenchman, is "more cooperation and greater integration."

"Europe needs a holistic growth strategy, where every country benefits from the efforts of others," he added.

With rapidly ageing populations and shackled by high debts, the countries of the eurozone record much lower growth than their counterparts in fast-growing Asia.

And recent debt crises have thrown a light on tensions within the eurozone, with powerhouse Germany coming under fire for being too slow to react.

"In a sense, the wheels of cooperation move too slowly," Strauss-Kahn said.

"Repairing the financial sector is taking too long, in part because policymakers are not paying enough attention to the pan-European dimension."

He said countries should help by taking action to boost demand.

"Since the recovery remains weak, policymakers must initially take steps to support demand where it is possible (...) in all cases, job creation must be a priority. Growth without jobs is growth without value."

Speaking more broadly in earlier comments, Strauss-Kahn said the post-crisis global economy would be very different to the system in place before the turbulence, calling for nations to pull together.

"The global economy after the crisis can't be the global economy before," he said in remarks to a European Central Bank conference.

"We have to fix the problems, one by one, and imagine what the next system could be like, which can only be based on cooperation."

The IMF boss said the priority had to be to restore growth in the global economy "even if it creates side effects."

© 2010 AFP

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