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IMF Warns Of Global Slowdown

Jul 8, 2013
Originally published on July 8, 2013 4:20 am
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DAVID GREENE, HOST:

NPR's business news begins with a critical eye towards the U.S.

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GREENE: Over the weekend, the head of the International Monetary Fund gave a speech that was pretty tough on our federal budget and the lawmakers behind it. IMF chief Christine Lagarde said the global economy is being impacted by the automatic spending cuts Congress imposed when it couldn't agree on a new budget.

NPR's Eleanor Beardsley reports from Paris.

ELEANOR BEARDSLEY, BYLINE: Speaking to economists gathered in the French provincial town of Aix-en-Provence, Lagarde called U.S. deficit reduction in 2013 excessively rapid and ill-designed. Lagarde said quote, "It is indispensable that countries enact predictable, credible fiscal policies anchored in legislation that will not be challenged."

Across-the-board federal government spending cuts, known as sequestration, went into effect in the U.S. in March because Republicans and Democrats can't agree on a long-term plan to reduce spending.

The cuts have led to furloughs and setbacks in some government programs. Economists say the haphazard cuts are weighing on private employers and help to explain a recent sharp slowdown in hiring in some sectors.

In its annual check of the health of the American economy, the IMF forecast that economic growth would be a sluggish 1.9 percent this year. It said the budget default plan could also be reducing growth by a further percentage and a half.

Lagarde, a former French finance minister, urged Washington to get it together and present a credible fiscal plan. She called budgetary deadlock inappropriate because it blindly affects certain expenditures that are essential to support medium- and long-term growth.

Eleanor Beardsley, NPR News. Transcript provided by NPR, Copyright NPR.