IMF chief warns Britain may have to ease spending cuts
IMF chief Christine Lagarde warned on Friday that Britain may have to ease its austerity measures due to a worsening economic outlook, but finance minister George Osborne insisted he would not change course.
While backing the government's overall policy of cutting public spending to reduce a record deficit, Lagarde urged policymakers not to shy away from adjusting the programme if the world economy deteriorated further.
The IMF chief said that British leaders needed to be "nimble" amid a sovereign debt crisis in Europe and economic problems in the US, during a speech in London before heading to a G7 meeting of top industrialised economies in France.
"Since the summer, the outlook has become more subdued -- including in the rest of Europe and the United States, the UK's major trading partners. So risk levels are rising," she said.
"The (British) policy stance remains appropriate, but this heightened risk means a heightened readiness to respond -- particularly if it looks like the economy is headed for a prolonged period of weak growth and high unemployment."
Speaking more generally about economies striving to recover recession, she added that "consolidating too quickly will hurt the recovery and worsen job prospects."
But Osborne, who has staked his political reputation on sticking to the radical cuts unveiled last year, insisted that the plan would not be changed.
"Britain will stick to the deficit plan we've set out," he said in a speech delivered alongside Lagarde at the Royal Institute for International Affairs think-tank.
"It is the rock of stability on which our recovery is built. It's delivered record low interest rates. Abandoning it would put that at risk."
Osborne is coming under mounting pressure to soften the austerity programme as Britain's economy struggles to pick up following the recession.
Official data showed the economy slowed to just 0.2 percent growth in the second quarter, after posting growth of 0.5 percent in the first three months of the year.
© 2011 AFP