Page last updated at 13:54 GMT, Sunday, 21 December 2008

IMF urges spending to spur growth

Dominique Strauss-Kahn
Mr Strauss-Kahn said the IMF would again lower its global growth projection

More spending by governments will be needed to stimulate worldwide economic growth, the head of the International Monetary Fund (IMF) has told the BBC.

Dominique Strauss-Kahn said he feared measures announced by the Group of 20 nations last month would not be enough.

The IMF has already cut its forecast for global growth next year, and he said the next projection, due in January, would be even worse.

Mr Strauss-Kahn spoke of "2009 as really being a bad year".

"I'm specially concerned by the fact that our forecast, already very dark... will be even darker if not enough fiscal stimulus is implemented," he said in an interview with BBC Radio 4.

'Less bad solution'

He said it would take a spending stimulus equivalent to about 2% of global Gross Domestic Product, or about $1.2 trillion (800bn), to make a real difference.

He added that given the choice between increasing the deficit and not fighting the recession, he favoured the "less bad solution".

One of the first things that has to be done is restore honesty and ethics to financial markets
Brian Hind, USA

He described European Central Bank chief Jean-Claude Trichet's warning that eurozone governments must keep a lid on borrowing as "noble".

"He's the head of the central bank - it's his job to say things like that," Mr Strauss Kahn said.

"We are in the biggest crisis we have experienced for 60 or 70 years and we have to take that into account," he added.

In November, the IMF lowered its global economic growth forecast to 2.2% from 3%.

In the BBC interview, Mr Strauss-Kahn was asked about the level of debt in the UK - 44.2% of GDP.

Shaun Ley, of BBC Radio 4's The World This Weekend, asked Mr Strauss-Kahn: "Markets seem to have made their own judgements about this: it is cheaper to get insurance against big multinationals like BP and McDonald's defaulting than it is to get insurance against UK government bonds going under. That is quite disturbing, isn't it, when a country is viewed in that way?"

"Yes, it is," Mr Strauss-Kahn said. "That is a good example of the fact that we are facing something which is almost unknown."

Last week, Mr Strauss-Kahn said the IMF could cut its 2009 forecast for China to around 5% amid an "unprecedented" global slowdown.

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