Don’t make haste to cut fiscal prop, IMF warns
The International Monetary Fund warned global financial leaders on Friday not to repeat the mistakes of the Great Depression and choke off emergency support for their economies too quickly.
In a document prepared for a meeting of Group of 20 finance ministers and central bankers in Scotland and seen by Reuters, the IMF stressed the fragility of global recovery, saying it was largely dependent on government and central bank support.
“One of the key lessons from the experience of similar crises such as the Great Depression and Japan in the 1990s is that withdrawing policy stimulus too early can be very costly, particularly if the financial system remains vulnerable and prone to adverse shocks,” the IMF paper said.
G20 meeting host and British Finance Minister Alistair Darling told Reuters policymakers would maintain their pledge to keep support in place until recovery was assured and also launch a new system of mutual checks to help rebalance world growth and prevent future crises.
“I think we can reach agreement on firstly making sure we don’t remove support too early because the recovery is by no means established everywhere,” he said.
