Debt: IMF Warns About Austerity

IMF says Europe's biggest economies should "consider delaying" cuts

IMF says Europe’s biggest economies should “consider delaying” cuts

Along with tidings that a recession throughout Europe is possible in 2012, the IMF (International Monetary Fund) also warned advanced European economies not to take tough austerity measures that could harm economic growth.

This comes as there are strikes in Greece over the recent harsh austerity drive, and the Coalition is bent on virtually eliminating the country’s deficit by 2015 through austerity measures.

The warning comes from the latest IMF report on European economic outlooks.

Eurozone solution ‘overdue’

The IMF also warned again about the growing mire surrounding the eurozone’s soverign debt issue.

“Finding a durable solution to the euro area sovereign crisis has become more than overdue,” said the IMF report.

“The pursuit of nominal deficit targets should not come at the expense of risking a widespread contraction in economic activity,” the report also said.

This means that if the economic situation were to continue in Europe’s largest economies such as the UK, Germany, and France, the IMF recommends that these countries “consider delaying” cuts.

Recession not ruled out

The European director for the IMF, Antonio Borges, also said that Europe is edging dangerously close to a recession. Though the IMF continues to predict growth in the next year, the numbers for 2012 are “modest,” says Borges.

Chief economist at Markit, Chris Williamson, said that this is due to the eurozone situation spreading throughout Europe.

“The malaise is spreading to the core, where surging rates of expansion earlier in the year have turned rapidly into contraction in Germany and only very modest growth in France,” said Williamson.

This is evident in the latest Markit/CIPS Service Purchasing Managers’ Index (PMI).

The index fell from 51.5 in August to 48.8 in September, its lowest figures since July 2009. Any reading below 50 on the PMI indicates contraction.

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