Commenting on the IMF Global Growth Forecast, Prof Philip Booth, Editorial Director at the Institute of Economic Affairs, said:
"There is no doubt that global growth is fragile. Indeed, even some of the rapidly growing middle-income countries such as China could face a difficult time ahead. However, the fact that the biggest danger to growth in Europe is the euro crisis demonstrates that we cannot resolve our growth problems by taking on more debt. Increased government spending may provide a spur to growth in the very short term but within a year growth will fall again as we deal with the consequences of higher government borrowing and taxes. We cannot avoid the costs of the debt bubble that built up in the early twenty-first century but we can act to deregulate the economy so that business has the best environment possible to invest and create wealth and jobs.
“The IMF are right to say that the politicians are behind the curve with regard to the eurozone problems. What needs to happen is an orderly default and an orderly winding up of those banks that are no longer solvent. We cannot use public money to recapitalise the banks further - all major euro zone countries except Germany are already borrowing to the limits."
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NOTES TO EDITORS
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
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