Tuesday, February 23, 2010

IMF Opposes Immediate Spending Cuts

The other day, I posted (here) about the rival letters from two opposing camps of economists. One camp - the deficit hawks - recommend immediate spending cuts to curtail increasing budget deficits. The other camp - the stimulus hawks - recommend delaying budget cuts for at least another year to give more time for economic recovery.

Now, the International Monetary Fund (IMF), which is ordinarily among the most hawkish of deficit hawks, is siding with the stimulus hawks. In a "public information notice" published this morning at the IMF website (here) the IMF's Executive Board stressed the need for eventual fiscal austerity to reduce debt-to-GDP ratios, but cautioned that large-scale spending reductions should not be implemented prior to "clear evidence of a self-sustaining recovery."

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