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Will IMF repeat its anti-austerity call? Will IMF repeat its anti-austerity call?
(4 months later)
Someone stands to lose face when the International Monetary Fund passes judgment on the UK on Wednesday. After two weeks crawling all over the economy, the big question is whether it will repeat the call it made last month for the chancellor to ease up on the pace of deficit reduction.Someone stands to lose face when the International Monetary Fund passes judgment on the UK on Wednesday. After two weeks crawling all over the economy, the big question is whether it will repeat the call it made last month for the chancellor to ease up on the pace of deficit reduction.
George Osborne was furious when IMF chief economist Olivier Blanchard dropped his anti-austerity bombshell during its spring meeting in Washington. The Treasury has been doing its utmost to get the IMF mission to change its view during talks over the past fortnight.George Osborne was furious when IMF chief economist Olivier Blanchard dropped his anti-austerity bombshell during its spring meeting in Washington. The Treasury has been doing its utmost to get the IMF mission to change its view during talks over the past fortnight.
The chancellor has been keen to stress that the government has already taken measures to boost activity. The budget contained the Help to Buy scheme to stimulate the flow of mortgages. On his return to the UK from the IMF meeting the Bank of England and the Treasury produced changes to the funding for lending scheme, to improve credit conditions for small and medium-sized businesses. Osborne has also argued that any benefits from a modest easing of fiscal policy could easily be swamped by the loss of government credibility from a policy U-turn.The chancellor has been keen to stress that the government has already taken measures to boost activity. The budget contained the Help to Buy scheme to stimulate the flow of mortgages. On his return to the UK from the IMF meeting the Bank of England and the Treasury produced changes to the funding for lending scheme, to improve credit conditions for small and medium-sized businesses. Osborne has also argued that any benefits from a modest easing of fiscal policy could easily be swamped by the loss of government credibility from a policy U-turn.
If this has failed to sway the IMF, it will put the chancellor in a spot, because in 2010 the fund provided the coalition with political cover by strongly backing austerity. Yet if it backs down a month after being so publicly critical of Britain, it will look weak.If this has failed to sway the IMF, it will put the chancellor in a spot, because in 2010 the fund provided the coalition with political cover by strongly backing austerity. Yet if it backs down a month after being so publicly critical of Britain, it will look weak.
Osborne's chances of success have not been helped by the international drift away from austerity in the past month. Indeed, Robert Reich, who was labour secretary under Bill Clinton, said in London on Tuesday that US policymakers use Britain as an example of why austerity is dangerous.Osborne's chances of success have not been helped by the international drift away from austerity in the past month. Indeed, Robert Reich, who was labour secretary under Bill Clinton, said in London on Tuesday that US policymakers use Britain as an example of why austerity is dangerous.
It would be a result for Osborne if the IMF were to tone down its language while leaving the message broadly unchanged.It would be a result for Osborne if the IMF were to tone down its language while leaving the message broadly unchanged.
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