IMF Warns Economy Needs More Investment

The International Monetary Fund (IMF) warned that the world’s nations must invest more money in their economies or risk a tip back in the direction of a recession. The comments were a repudiation of the beliefs by many, particularly Germany, that austerity is the key to economic recovery.

The IMF directive stated:

“Growth and jobs were a very strong focus of our discussions,” said Singapore Finance Minister Tharman Shanmugaratnam, who chaired the twenty-seventh meeting of the IMFC on April 20.

“There was also a strong and common recognition that achieving growth and jobs cannot rest on one policy alone. There is no single bullet that will get us to normal growth and some normality with regard to jobs,” said Tharman.


IMF Managing Director Christine Lagarde underscored the focus on job growth. She said a mix of policies can help to move the world beyond the “three-speed” recovery — where some countries are doing well, others are on the mend, and others are lagging behind — that has emerged since the IMFC last met in October 2012 at the Annual Meetings in Tokyo.

“Every policymaker is keen to develop jobs and to respond to the demands of the young population in particular,” Lagarde said at a news conference following the IMFC meeting.

“Anything that works to create jobs” is on the table, said Lagarde, “starting with growth and a good policy mix which relies on not just one policy but a set of policies that will include fiscal consolidation at the right pace, structural reforms. . .and monetary policy, which provides the breathing space.”

Policies to boost growth were a focal point, said Tharman, who added that the IMFC saw accommodative monetary policy appropriate in the short term but added fiscal and structural policy action is needed too.

“The emphasis was toward a better balance of strategies — monetary, fiscal and structural — with a strong emphasis on medium-term fiscal and structural reforms rather than an overly heavy reliance on monetary policy,” said Tharman.

Unemployment is well above 10% in some nations in the European Union, and in Spain and Greece it is above 25%. Youth unemployment is above 25% in these two nations. The IMF is concerned that Europe will have a “lost generation” economically, which will neither work nor consume, if the money to educate and raise children is not provided.

Among other things, central bank policies should resemble those in the United States, United Kingdom and Japan that already have been built in a way that should improve growth. But the actions of three countries, no matter how large they are, are not enough to turn a negative global trend.