IMF and Osborne in austerity row
The UK chancellor, George Osborne, has found himself embroiled in a conflict with leading members of the International Monetary Fund (IMF) over Britain’s austerity policy.
Second in command at the IMF, David Lipton, has followed Managing Director Christine Lagarde and Chief Economist Olivier Blanchard in criticising the fast pace of Mr Osborne’s spending cuts.
Speaking to Sky News, Mr Lipton said: “The UK economy has turned out to be weaker than had been foreseen, so our view is that the pace of consolidation ought to be reconsidered.”
Mr Lipton’s words shouldn’t come as a surprise to the chancellor following those of Chief Economist Olivier Blanchard, to which Mr Osborne dismissed as “just one voice”.
Speaking to Sky News last week, Mr Blanchard said Mr Osborne was “playing with fire” in regards to his economic policy.
Meanwhile, Christine Lagarde explained: “The growth numbers are not particularly good,” at a press conference in Washington. “There is nothing new,” she added.
George Osborne, on the other hand, has defended his programme of cuts, believing it to have “demonstrated flexibility”.
“Britain’s got the right plan in terms of dealing with this deficit,” Mr Osborne told BBC News. He added: “We’ve got a plan that gives us credibility in the world and enables us to borrow at a low interest rate.”
The numbers, however, tell a different story. Figures indicate the UK economy shrank by 0.3% in the final quarter of 2012, while those for the first quarter of 2013 are expected to land next week.
Despite his resolute demeanour, these may prove nervous times for the chancellor following the recent Fitch credit rating downgrade. Further economic contraction would plunge the UK into a triple dip recession.
Representatives from the IMF are set to arrive in London next month for an annual assessment, whereon Mr Osborne will clarify his plans to boost the British economy.