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The International Monetary Fund cut its forecast for U.S. economic growth on Friday and warned Washington and debt-ridden European countries that they are "playing with fire" unless they take immediate steps to reduce their budget deficits.
Yet that relatively benign global outlook could quickly fall apart if politicians in the United States and Europe do not start showing more leadership in addressing their countries' debt problems, the fund warned.
"You cannot afford to have a world economy where these important decisions are postponed, because you're really playing with fire," said Jose Vinals, director of the IMF's monetary and capital markets department.
"If you make a list of the countries in the world that have the biggest homework in restoring their public finances to a reasonable situation in terms of debt levels, you find four countries: Greece, Ireland, Japan and the United States," Vinals said.
Greece has edged closer to default as euro zone officials disagree on a planned second aid package for the indebted country. With strikes and protests around the country, political turmoil has added to uncertainty, stoking fears that the government will not be able to tighten its belt enough to reduce crippling deficits.
Fears of contagion in the euro zone have driven global stock markets lower in recent sessions.
Robust economic growth and rising inflation have caused emerging economies to tighten monetary policy with higher interest rates and reserve requirements, even as many developed nations keep policy ultra-loose to try to boost anemic growth.
The IMF warned that many emerging markets still need more tightening. In China, for example, the high inflation rate means negative real interest rates.
Some emerging markets have been reluctant to tighten too far, fearful of derailing growth or attracting speculative investment flows that could push their currencies ever higher.
The IMF raised its growth view for the euro area in 2011 to 2.0 percent from 1.6 percent. For 2012, the IMF saw growth at 1.7 percent, little changed from its previous 1.8 percent.
Originally posted by DAVID64
Sometimes I think they WANT rioting, looting and all the rest. That way they can finally declare martial law and Obama can live his dream of dictator.
Originally posted by daynight42
Originally posted by DAVID64
Sometimes I think they WANT rioting, looting and all the rest. That way they can finally declare martial law and Obama can live his dream of dictator.
Whatever. People said the same thing for Bush when he was in term and enacted the Patriot Act.
NEVER HAPPENED.