IMF's Lagarde joins in warning on austerity and growth

Christine Lagarde
Image caption IMF head Christine Lagarde signed the letter warning on the growth outlook

The heads of the IMF and World Bank have joined other influential figures in calling on countries to implement free trade, reform their economies and protect economic growth.

They warned that austerity programmes should "promote rather than reduce prospects for growth".

The warning came in a "call to action" in the run-up to the World Economic Forum in the Swiss resort of Davos.

Leaders warned the world faced slowing growth and rising unemployment.

They also called for world leaders to take action to tackle inequality.

The signatories included:

  • Mark Carney, chairman of the Financial Stability Board,
  • World Health Organization boss Margaret Chan,
  • OECD secretary general Angel Gurria,
  • World Trade Organization director general Pascal Lamy,
  • International Monetary Fund head Christine Lagarde,
  • World Bank president Robert Zoellick,
  • and the leaders of the International Labour Organization, World Food Programme and three regional development banks.

Inequality warning

However, the signatories, who sit on the World Economic Forum's Global Issues Group, said their statement did not necessarily reflect the views of their organisations.

In the short term, the statement said, leaders should remove trade barriers, provide capital to the banking system, make government finances more sustainable and focus on youth and long-term unemployment.

However, they warned that "fiscal consolidation" programmes should be applied in a "socially responsible" manner, in order to promote growth and employment.

In the longer term, the statement called for action on labour market reforms to boost employment, inequality and green growth.

"Rising inequality calls for heightened consideration of more inclusive models of growth. We must deliver tangible improvements in material living standards and greater social cohesion," it said.

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