By John Sexton
Speaking in Madrid yesterday, the managing director of the International Monetary Fund (IMF) Dominique Strauss-Kahn, warned that the world would face an even deeper downturn than feared unless governments increase currently planned economic stimulus packages.
Strauss-Kahn said IMF forecasts of a 2009 quarter percent fall in the GDP of advanced countries and 2.2 percent overall world growth, would almost certainly have to be revised downwards.
He urged the countries of the European Union, in particular, to boost their economic stimulus packages, saying the current European plan to spend approximately 1.5 percent of GDP was inadequate. The IMF has recommended the world spend around 2 percent of global output on anti-recession measures.
Strauss-Kahn said 2009 GDP growth in China might halve from a 2008 rate of around 10 percent. "We started with China at 11 percent growth, then 8, then 7, then China will probably grow at 5 or 6 percent, " he said.
It is generally accepted that China must grow at a rate of 8 percent or over to generate enough jobs to absorb its expanding workforce.
The IMF head warned that unrest of the type recently seen in Greece could spread to other countries, including advanced countries, unless governments took decisive action both to combat the downturn and to ensure the financial system benefited everyone and not just the elite.
In calling for increased spending by European governments, Strauss-Kahn was implicitly intervening in a bitter war of words that has broken out between Britain, which favors high-spending recovery plans, and Germany, whose finance minister Peer Steinbrück last week referred to some measures taken by the British government as "crass Keynesianism."
Strauss-Kahn was speaking at a meeting hosted by Spain's Central Bank to mark the 50th anniversary of Spain joining the IMF.
(China.org.cn December 16, 2008)
