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IMF warns on recession’s “social consequences”

Economic growth, Financial Events, Leverage
By Paul Hodges on 12-Jan-2009
Strauss-Kahn right.jpg

Dominique Strauss-Kahn, MD of the International Monetary Fund (IMF), has a surprisingly hard-hitting interview today in Bloomberg.

Casting aside normal central bank reticence he warns:

• Their current $1.4 trillion forecast of global financial losses will soon be increased by a “significant” amount.
• They will have to further reduce their November GDP forecast, which was already at a recession-level 2.2%.
• US tax cuts might have “very little impact on growth” unless targeted only at “the most vulnerable,” who are likely to spend the extra cash.
• W European governments are “behind the curve” in implementing stimulus packages and are “still underestimating the needs.”
• “Rates in Europe will probably go down in coming months. A decrease in interest rates is welcome but the impact will not be very important.”
• “If in six months from now the crisis has worsened and many other of our members need our help, the demand may be above what we have.”

As a former French Finance Minister, his final warning on the European outlook has psrticular resonance. He worries that “a rate of growth between -1% and -2% may have some really strong social consequences”.