IMF report reveals “urgent” need to cut deficits
In its latest Fiscal Monitor report, the International Monetary Fund (IMF) said that despite the recovery in the global economy, the world’s wealthiest economies urgently need to tackle their debt levels.
Its report, and warning, comes as several euro zone nations have introduced tough austerity measures to trim their debt levels, which have caused violent protests amid national strikes.
Tough austerity measures in Greece resulted in workers staging strikes across the country and led to three deaths in Athens earlier this month after protesters set fire to a bank.
Spain’s two biggest unions, the CCOO and the UGT, are to stage a walkout on June 2 and have threatened to call a general strike to protest against austerity measures.
Over the weekend, Italy said it will introduce measures similar to those announced by Greece and Spain.
Meanwhile, in its report, the Fund said: “Even as the global economy improves, fiscal balances in the advanced economies are on average worsening.”
It added: “As economies gradually recover, it is now urgent to start putting in place measures to ensure that the increase in deficits and debts resulting from the crisis… does not lead to fiscal sustainability problems.
“If public debt is not lowered to pre-crisis levels, potential growth in advanced economies could decline by over half a per cent annually, a very sizable effect when cumulated over several years.”
According to the IMF, the UK is on course for one of the biggest increases in debt over the next 20 years of any of the world’s rich economies.
It suggests raising VAT (something that the new coalition Government is expected to implement).
The UK’s deficit currently stands at 11.4% of GDP but other countries have far worse deficits with Ireland’s at 12.2% and the USA’s estimated at 11% of GDP.
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