- NEW YORK -- The International
Monetary Fund last night warned that the gaping US budget deficit, ballooning
trade imbalance and falling dollar were posing a serious threat to the
health of the global economy.
-
- It sounded the alarm in a critical report on US fiscal
policy, which rounds on the Bush administration's crowd-pleasing tax cuts
last year. The US is facing a record-breaking budget deficit, expected
to exceed $400bn (£222bn) this year and the IMF urged Washington
to get its house in order by raising taxes and cutting spending.
-
- Debt is expected to reach 40% of the US economy, which
the report described as "an unprecedented level of external debt for
a large industrial country" that would push up global interest rates
and slow growth.
-
- The US appetite for borrowing would cause the weakened
dollar to plunge further hurting other economies still trying to get back
on their feet. The dollar has lost 20% of its value against the euro in
the past 18 months. It said there was a diminishing appetite among foreign
investors to hold US assets.
-
- "This trend of deficits is likely to continue to
put pressure on the US dollar," it said. "Although the dollar's
adjustment could occur gradually over an extended period, the possible
global risks of a disorderly exchange rate adjustment, especially to financial
markets, cannot be ignored."
-
- The fall had already "complicated" macroeconomic
policy in countries such as Japan and those in the eurozone.
-
- The IMF also said the deficits could deter private investment
within the US, hurt long term productivity growth and endanger social security
programmes.
-
- Washington officials dismissed the report as alarmist
and said the president had already promised to cut the deficit in half
over the next five years.
-
- Guardian Unlimited © Guardian Newspapers Limited
2004
-
- http://www.guardian.co.uk/usa/story/0,12271,1118425,00.html
|
