The IMF shifts its position on the UK

Is the IMF telling the Government to adopt a fiscal Plan B and to slow the pace of deficit reduction? I think the answer is no. But is it moving closer to such a call? Affirmative, in my view.

Here’s what the IMF said in in July in its UK-specific country report:

“If the economy appears likely to experience prolonged weak growth and lower inflation, fiscal automatic stabilizers should operate freely and monetary policy should be kept loose for an extended period. To prevent a downturn from becoming entrenched,  additional stimulus may be required from BoE asset purchases and temporary targeted tax cuts, combined with deeper long-run entitlement reform to safeguard fiscal sustainability and market confidence.”

Here’s what the IMF managing director, Christine Lagarde (right), said on her visit to London earlier this month:

“The 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.”

And here’s what the World Economic Outlook said yesterday:

“If activity were to undershoot current expectations, countries that face historically low yields should also consider delaying some of their planned adjustment (Germany, United Kingdom).”

That, though, was qualified by the IMF economist, Jorg Decressin, at the press conference who said:

“Policies…should only be loosened if growth really threatens to slow down substantially, relative to what we are forecasting.”

In other words, not yet.

But bear in mind that this is the third IMF downgrade of UK growth this year. If that trend continues, we’ll definitely reach the moment the IMF has identified when emergency action should be taken.

I actually doubt that the IMF would ever come out and tell George Osborne directly to ease up on the deficit reduction. It’s too politically awkward. And the IMF doesn’t tend to tell the powerful nations what to do.

Yet that doesn’t stop others reading between the lines.

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• greggf

  Compared to the austerity inflicted on and planned for Greece, Osborne’s cuts seem tame. 
    

• http://www.yahoo.co.uk/ Firozali A.Mulla

  Oh how I love the stories from 1950s. One day we want to fight another day let them starve. Read on President Obama on Wednesday urged Israelis and  Palestinians to resume negotiations, saying the path to peace will not “come through statements and resolutions at the UN.” “I am convinced that there is no short cut to the end of a conflict that has endured for decades,” Obama said in his address to the United Nations General Assembly. “Peace will not come through statements and resolutions at the UN — if it were that easy, it would have been accomplished by now.”Obama’s comments came as his administration has voiced its opposition to Palestinian President Mahmoud Abbas’ intention to pursue Palestinian statehood through a request for full UN membership. Secretary of State Hillary Clinton told reporters earlier this week that Washington was engaged in “extremely intensive” diplomacy behind the scenes of the General Assembly to head off Abbas’ attempt. “We continue to believe and are pressing the point that the only way to a two-state solution, which is what we support and want to see happen, is through negotiations,” she said, according to AFP. Abbas told UN Secretary-General Ban Ki-moon on Monday that he planned to submit the bid on Friday. “Ultimately, it is Israelis and Palestinians — not us — who must reach agreement on the issues that divide them. On borders and security, on refugees and Jerusalem,” Obama said. While Obama reiterated his call for an independent Palestinian state, he also declared that “America’s commitment to Israel’s security is unshakable, and our friendship with Israel is deep and enduring.”  “And so we believe that any lasting peace must acknowledge the very real security concerns that Israel faces every day,” the president said. “Let’s be honest: Israel is surrounded by neighbors that have waged repeated wars against it.”I thank you Firozali A.Mulla DBA

• http://www.yahoo.co.uk/ Firozali A.Mulla

  Ben Chu. Carry on reporting I love this but hold on read this also.Columbia University and Mahmoud Ahmadinejad might seem to be an odd couple, but for a while last week it looked as if they might be dating. A few years back, when an invitation (extended by a dean) to the Iranian leader generated outrage and bad publicity, Columbia’s president, Lee Bollinger, responded by trashing Ahmadinejad before introducing him. On Sept. 13 Fox News reported that an undergraduate organization — the Columbia International Relations Council and Association (CIRCA) — had set up a dinner, scheduled for the 21st, at which Ahmadinejad would interact with a group of students and, perhaps, with Bollinger. It turns out, however, that there may not be any dinner, at least not one sponsored by Columbia or attended by its president. Robert Hornsby, assistant vice president of media relations at Columbia, was quite adamant when I spoke to him. At no time, he declared, has there been any university event planned or considered involving the president of Iran. So maybe there’ll be a dinner and maybe some Columbia students will be there, but if it happens it will be a private, not an institutionally authorized, affair. But even if the dinner never takes place, it has already acquired enough of a media reality to be controversial. (In these days of that engine of derivatives called the Internet, no facts are needed.) On Sept. 14, one day after the Fox News story, the Shurat HaDin Israel Law Center sent Bollinger a letter asserting that because the U.S. State Department lists Iran as a state sponsor of terrorism, “hosting Ahmadinejad is not merely morally repulsive: it is illegal and will expose Columbia I do not like politicians but then we need them.
  I thank you Firozali A.Mulla DBA

• Jake_K

  And compared to the austerity planned even by lovely Labour, Osborne’s cuts seem the same.

• julianzzz

  Is the IMF suggesting to George Osborne, that he’d have done better to have adopted Labour’s election economic strategy of going slower with reducing the deficit? Are we going through needless pain and damaging our economy just because George wants to show he’s different to Gordon? I would suggest that from a post-election economic perspective he’s even worse. Apart from being more photogenic and less awkward on camera he projects limp-wristed coolness as opposed to one-eyed rage, so there’s an improvement for the tabloids, but not one that matters in the real world.