IMF warns global economic slowdown deepens, prods U.S., Europe

Tue Oct 9, 2012 9:02am EDT
 
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By Emily Kaiser and Lesley Wroughton

TOKYO (Reuters) - The IMF said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.

Global growth in advanced economies is too weak to bring down unemployment and what little momentum exists is coming primarily from central banks, the International Monetary Fund said in its World Economic Outlook, released ahead of its twice-yearly meeting, which will be held in Tokyo later this week.

"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," it said.

"The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges."

Ahead of the Tokyo meeting, policymakers have flagged the U.S. "fiscal cliff" -- government spending cuts and tax raises due to take affect early in 2013 -- and resolving the euro area's debt crisis as the top issues facing the global economy.

U.S. Treasury Secretary Timothy Geithner said on Tuesday that reforms in Europe "could take years to bear fruit".

"In these periods of time, where people were very worried about the risk of collapse in Europe, you saw an impact on financial markets and confidence that was very, very substantial," he told a meeting of Indian and U.S. business leaders in New Delhi. "Europe still has a very hard road ahead of them."

His comments echoed those of Canadian Finance Minister Jim Flaherty, who last week said Europe's debt crisis was "a clear and present danger".   Continued...

 
International Monetary Fund's Economic Counsellor and Director of Research Department Olivier Blanchard (2nd R), Deputy Director Jorg Decressin (2nd L), Division Chief Thomas Heibling (R) and Senior Press Officer Gita Bhatt hold a news briefing on the World Economic Outlook (WEO), at the Tokyo International Forum in Tokyo October 9, 2012. The IMF said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump. REUTERS/International Monetary Fund/Stephen Jaffe/Handout