IMF chief: double-dip a risk if stimulus ends too early

Wed Jan 20, 2010 9:37am EST
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By Hideyuki Sano

TOKYO (Reuters) - Developed countries may slip back into recession if they abandon strategies deployed to battle the global financial crisis too early, the head of the International Monetary Fund warned on Monday.

Recovery in private demand and employment are necessary conditions for governments to begin unwinding policies designed to support their economies, though the right timing depends on specific conditions in each nation, Dominique Strauss-Kahn said.

"Recovery in advanced economies has been sluggish," he told reporters in Tokyo. "We have to be cautious because the recovery has been fragile."

Marek Belka, the head of the IMF's European department, echoed Strauss-Kahn's comments, saying the continent's economy was not yet on solid ground.

"We are no longer at the edge of the abyss that loomed in early 2009, with all but a handful of Europe's economies now pulling out of recession. But it is less clear that we have reached safe ground," Belka, Poland's former prime minister, wrote in a blog (

"It is important for fiscal and monetary policies to continue to support the recovery," he wrote.

Strauss-Kahn said Japan's experience with its own financial crisis since the late 1990s shows that recovery begins only when companies and banks have cleaned up their balance sheets, adding that many impaired assets around the world have not yet been disclosed.

Tackling high levels of public debt, which many developed countries have piled up to save their economies, will become top priority for many governments, he continued.   Continued...