Friday, March 26, 2010

IMF Tells Rich Countries to Stop Going Bananas

It's the IMF now that tells us that developed nations have been acting like banana republics, without showing any sign of regret. This WSJ article explains:

BEIJING—The International Monetary Fund on Sunday urged countries, particularly those with advanced economies, to pare their fiscal deficits and debt to prudent levels by carrying out pension and health entitlement reforms.

IMF First Deputy Managing Director John Lipsky said in remarks delivered in Beijing that high public debt and fiscal deficits have already raised the risk premium for several countries, and could lead to higher interest rates and slower economic growth in the medium term. ...

Mr. Lipsky said that unwinding stimulus programs introduced during the financial crisis won't be enough. "Such measures have accounted for only about one-tenth of the projected debt increase," he said. "Merely winding down the stimulus won't come close to bringing deficits and debt ratios back to prudent levels, considering the projected increases in health care and other entitlement spending." He urged governments to strengthen fiscal institutions and carry out entitlement overhauls, such as increases in the retirement age, to help bring down both their debt and their deficits.

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