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6/29/11

IMF warns US of debt ‘shock’ - by James Politi

The International Monetary Fund has warned of a “severe shock” to global financial markets if the US does not move quickly to increase its borrowing authority, adding pressure on Congress and the White House to clinch a deal on fiscal policy.

In its annual report on US economic policy, the IMF cited “unfavourable fiscal outcomes” as one of the key dangers to the country’s economic outlook.

In its report, the IMF said striking the right balance on fiscal policy represented the main challenge facing US economic officials. The fund said fiscal consolidation needed to proceed and losing fiscal credibility could be very damaging, and is recommending that deficit reduction should begin next year – with the overall effort to include both spending cuts and tax increases through the elimination of special incentives and deductions.

For more: IMF warns US of debt ‘shock’ - FT.com

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