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Last Updated: Sunday, 21 September, 2003, 15:16 GMT 16:16 UK
IMF calls for 'balanced' growth
VW Golf production line in Germany
The US wants Europe to help drive growth
The global economy is steadily recovering but growth still faces risks in many countries, according to the International Monetary Fund (IMF).

Following a meeting of the IMF's financial committee, the body said it was in all countries' interests for the removal of obstacles to balanced growth.

It said the US, which has a large budget deficit, would need to focus on its fiscal policy, while Europe needed to speed up its structural reforms.

The committee also called for a quick resumption of the Doha round of world trade talks, which collapsed without agreement last weekend following a meeting in Cancun, Mexico.

Budget deficit

The IMF committee, chaired by British Chancellor of the Exchequer Gordon Brown, said prospects for a "steady but strengthening" global recovery had improved.

But it added a more balanced growth pattern would be desirable, and "sustainable and vigorous structural reforms in many areas, and domestic sources of growth, are important in this respect".

While the US has been the main engine of global economic growth recently, tax cuts aimed at stimulating its economy have pushed the US budget deeply into the red.

In 2003/04 the US is forecast to reach a record budget deficit of $480bn.

The IMF said fiscal policy in the US would need to "focus on strengthening sustainability over the medium term".

Expansion needed

The IMF urged Europe to speed up structural reforms of its economy, and called on Japan to strengthen its banking and corporate sectors and combat deflation.

Europe has been criticised for not doing enough to encourage growth, with the main eurozone economies lagging behind the US.

Earlier on Sunday, US Treasury Secretary John Snow called on Europe to adopt "more accommodative monetary and fiscal policies".

"The US has emerged as the only real engine of growth in the G7... and this is troublesome," Mr Snow said.

However, US Treasury spokesman Rob Nichols said later Mr Snow was not calling for the European Central Bank to cut interest rates.

"Snow was not calling for a change in monetary policy. He was simply underscoring the broad idea that you need good monetary, fiscal and regulatory policies to grow," Mr Nichols said.

Trade talks 'crucial'

The IMF said it was vital that latest round of world trade talks resumed as quickly as possible.

Last weekend, the trade summit at Cancun, Mexico collapsed amid serious differences between rich and poor nations.

The main sticking point was the refusal of rich countries to cut huge subsidies they give to their farmers.

But the IMF urged all parties to resume discussions saying they were vital for economic growth.

"The committee reiterates the crucial importance of removing the obstacles and moving forward without delay, and calls on all countries to play their part," the IMF said.

The BBC's Tanya Beckett
"A few firms could step in at a very low price and control Iraqi business"

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