IMF chief tells economic powers to focus on growth, criticizes U.S. sequester
WASHINGTON — The head of the International Monetary Fund said the United States, Europe, Japan and China all need to make adjustments to their economic policies to boost a still-struggling global economy.
IMF Managing Director Christine Lagarde says the United States and many countries in Europe need to focus more on growth and less on trimming budget balances this year. She said there was a critical need for policies focused on spurring jobs. Lagarde told a news conference on Thursday that “we need growth, first and foremost.”
Lagarde spoke to reporters to preview upcoming discussions among finance ministers and central bank governors of the world's 20 major economies plus the spring meetings of the 188-nation IMF and its sister lending institution, the World Bank.
Earlier this week, the IMF lowered its outlook for the world economy this year, predicting that government spending cuts would slow U.S. growth and keep the 17-nation area that uses the euro currency in recession.
Officials of the Group of 20, which includes Treasury Secretary Jacob Lew and Federal Reserve Chairman Ben Bernanke, were scheduled to begin their discussions over a working dinner Thursday night and wrap up Friday with the issuance of a joint communique. The G-20 is composed of the world's major developed countries such as the United States, Japan and Germany and fast-growing developing nations including China, Brazil and India.
That joint statement was expected to repeat a pledge the group made at their last meeting in February that they would avoid using competitive currency devaluations to gain advantages in trade.
Lew, previewing the U.S. objectives going into the meetings, said that he would press Europe to do more to support growth and would maintain pressure on Japan and China to avoid lowering the value of their currencies to boost their exports at the expense of the United States and other countries.
Lew said it was important that G-20 nations “avoid a downward spiral of ‘beggar thy neighbor' policies,” the type of destructive trade competition that worsened the Great Depression in the 1930s.
In her comments, Lagarde talked about the dangers of overemphasizing deficit reduction with growth still fragile. She said the United States had avoided the “fiscal cliff” of across-the-board tax hikes and spending cuts at the beginning of this year that could have derailed the U.S. economy but had made a policy error by allowing $85 billion in across-the-board spending cuts, known as a sequester, to take effect on March 1.
Lagarde said the United States needed to pursue “better quality” deficit reductions with less impact coming in the near-term.