The world’s largest economy was criticised by the International Monetary Fund due to its slow private sector growth and its $85 billion public spending cuts. The IMF is one of several organisations to criticise the country’s approach to reducing its public sector spending, which involves uniform budget caps across several departments.
The United States plans to reduce public sector spending by almost $1 trillion over the next ten years using blanket budget cuts referred to as a ‘sequester budget.’ The cuts will affect a wide variety of government departments, and have been criticised by the IMF and other groups due to their lack of targeted budget reduction.
The IMF contends that the United States government should focus its budget cuts on government departments that produce little immediate job growth. Putting the cuts on hold, the IMF claims, could produce a 3 percent growth rate for the US this year – a significantly higher figure than the 1.9 percent growth the organisation predicts.
Current budget cuts planned by the United States reduce spending evenly from a wide range of government departments. The IMF claims that budget cuts should focus on reducing pension and healthcare spending, while increasing the amount spent on major infrastructure projects and education.
The organisation claims that reducing spending across the board will limit medium-term economic growth, as departments responsible for large infrastructure projects struggle to deal with reduced spending abilities. Despite its criticisms, the IFM gave the Federal Reserve a positive review for its continued quantitative easing policies.
The IMF has forecast growth of 1.9 percent for the United States during 2013, and a growth rate of 2.7 percent in 2014. The group recommends the United States slow its austerity efforts and instead focus on making slower, reasonable cuts to public services that will not contribute to short and medium-term economic recovery.Read more
The German interior minister, Hans-Peter Friedrich, has said that Germany is actually prepared to come to the aid of Greece but only if they agreed to help themselves by honouring the agreements set forth in bailouts.Read more
Although there has been some degree of progress in both Greece and Italy, it is feared that Spain will be the next sovereign nation in the EU to succumb to the debt crisis. Around the world markets began gaining as news spread that political leadership in Greece and Italy had been revamped.Read more
Economy October 16, 2011
Plans proposed by the International Monetary Fund (IMF) and European government leaders for a larger bailout fund are expected to be backed by G20 finance ministers, during a summit in Paris this Saturday. Proponents say that the additional funds would help provide monetary assistance to indebted countries and contribute to averting the current debt crisis to preserve the eurozone.Read more
Economy October 14, 2011
After a recent proposal made by Europe’s banking industry regulator, the European Banking Authority (EBA), banks may need to raise an accumulative €200 billion to boost capital reserves in order to meet new regulations. The new EBA regulations would require banks to have a capital reserve of at least 9 to 10% of the total of all their assets.Read more
In their most recent statement, the IMF is warning that the UK government’s austerity programme may need to be set back if growth continues slowing. This is the third forecast in as many months that has the economy on a downward spiral.Read more