Tags: IMF | Chief | Cut | Austerity

IMF Chief Lagarde Urges ‘Gradual’ Deficit Cut as Voters Reject Austerity

Monday, 07 May 2012 01:22 PM

International Monetary Fund Managing Director Christine Lagarde called on developed nations to push through “gradual” fiscal cuts as voters in France and Greece rejected austerity as the sole fix to Europe’s debt crisis.

“Austerity versus growth is very much the debate of the hour,” Lagarde said today in remarks prepared for a speech at the University of Zurich, Switzerland. “I would argue it is not ‘either/or.’ We can design a strategy that is good for today and good for tomorrow.”

With unemployment in the euro region at the highest in almost 15 years and an economy the IMF predicts will shrink this year, some members of the 17-nation group are challenging austerity plans advocated by Germany.

French Socialist Francois Hollande defeated President Nicolas Sarkozy yesterday and pledged to push for less austerity and more growth in Europe. Spain and Italy are relaxing deficit targets and the government of the AAA-rated Netherlands fell last month amid the effort to deepen deficit cuts.

While fiscal adjustment “is essential” and requires governments to lay out a plan for reducing debt in the medium run, “we know that fiscal austerity holds back growth, and the effects are worse in downturns,” Lagarde said.

As a result, “the right pace is essential,” she said.

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Monday, 07 May 2012 01:22 PM
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