IMF urges care as Europe worries recovery may slow

Tue Jan 19, 2010 7:32am EST
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By Brian Love

PARIS (Reuters) - France raised its economic growth forecast for 2010 on Monday but the central banks of Germany and Italy offered more sobering readouts on the probable strength of the recovery from recession in Europe.

The predictions on growth came alongside warnings from International Monetary Fund officials of the risks that developed economies may relapse if too rapidly deprived of the huge fiscal and monetary stimulus deployed to combat the aftermath of the financial crisis.

"We have to be cautious because the recovery has been fragile," IMF chief Dominique Strauss-Kahn said during a visit to Japan. He said pickups in employment and private demand should precede removal of such life support.

In France, which has suffered a relatively less severe fall in economic output than much of the 16-country euro currency area, Economy Minister Christine Lagarde announced an upgrade in 2010 forecasts for gross domestic product after a drop of some 2.25 percent last year.

The government of the euro area's second largest economy was now expecting GDP growth of 1.4 percent, which is almost twice a previously forecast 0.75 percent, due to "improved international environment and demand for French products," she said.

"The situation in the French economy improved toward the end of 2009 and our forecasts for the start of 2010 have also brightened," Lagarde told reporters.


The news, which came as finance ministers from across the euro zone met for regular talks in Brussels, was less upbeat from two of France's major neighbors.   Continued...