Lagarde: IMF May Urge Osborne Over Austerity

Ed Conway, Economics Editor

Christine Lagarde has given her firmest signal yet that the International Monetary Fund is on the brink of issuing George Osborne with detailed advice on changing his austerity plans.

The IMF managing director warned that Britain's economic growth performance is "not particularly good", reinforcing suspicions that the fund will ask the Chancellor to moderate the severity and speed of his austerity plans.

The fund's chief economist, Olivier Blanchard, was more forthright earlier this week, telling Sky News that Britain's economic policy plans were "playing with fire".

Ms Lagarde refrained from passing detailed judgement ahead of the fund's official Article IV annual survey of the country, which takes place next month.

But she said: "We have repeatedly said in the last couple of years that should growth abate and be particularly low there should be consideration to adjusting by slowing the pace (of fiscal consolidation).

"Looking at numbers - without having dwelt under the skin - the growth numbers are not particularly good. This is a continuum of (our) position. What has changed is the quality of the numbers."

The comments came as the incoming Bank of England Governor, Mark Carney, said that Britain should be considered one of the world's "crisis economies".

In comments at an event on the fringes of the IMF meetings, he said: "There are three classes of economy. There's the crisis economies, including the United States, which is breaking out of that pack; it includes the Eurozone, the UK and Japan."

Mr Carney also dismissed hopes that central banks such as the Bank of England or the Bank of Canada, where he is currently Governor, could single-handedly generate growth.

He said: "Can they deliver sustainable growth? The answer is no. They can help with balance sheet repair and, for instance, transition to more sustainable euro area.

"But they can't deliver the long term growth necessary. That needs to come through full fiscal adjustment and fundamental structural reforms."

Ms Lagarde's comments on the fiscal situation in the UK will set up one of the most-eagerly awaited IMF annual surveys in recent British history, with the fund expected to set out precisely how far it expects the Government to change its position on tax and spending.

Although the IMF's advice is not binding, a negative judgement would be highly embarrassing for the Chancellor, even beyond the already critical comments of the fund.

Ms Lagarde also addressed the news that she has been summoned to appear in court in France over her handling of a scandal when she was the country's finance minister.

She said: "There is nothing new under the sun. Ever since 2011 I had known very well that I would be heard by the investigating commission of the Courts de Justice.

"I'll be very happy to travel for a couple of days to Paris but it's not going to change my focus, my attention and my enthusiasm for doing the work that I do."

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