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Friday, April 26, 2013
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IMF, ECB square off over austerity IMF warns of risk that Europe will stagnate but ECB opposes delays to fiscal consolidation By Marc Jones and Huw Jones
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HEATED debate about Europe’s austerity drive flared up yesterday with leading IMF and European Central Bank officials sharply at odds and Angela Merkel declaring that Germany required higher interest rates. With the threat of the currency bloc’s break-up receding, some eurozone officials are saying now is the time to throttle back on debt-cutting drives because calmer financial markets will not react badly. The International Monetary Fund is also pushing that prescription - for both the eurozone and Britain but Germany and the ECB are opposed. “There is ... a risk that Europe could fall into stagnation, which would have very serious implications for households, companies, banks and other bedrock institutions,” IMF First Deputy Managing Director David Lipton told a conference in London. “To decisively avoid that dangerous downside, policymakers must act now to strengthen the prospects for growth,” he said. But at the same conference, the Economist’s Bellwether Europe Summit, ECB Executive Board member Joerg Asmussen urged governments to push on with budget consolidation and reforms.
“Delaying fiscal consolidation is not an easy way out. If it were, we would have taken it,” Asmussen said. “Delaying fiscal consolidation is no free lunch. It means higher debt levels. And this has real costs in the euro area where public debts are already very high,” he said. The ECB is expected to cut interest rates next week, although a quarterpoint reduction is unlikely to lift the eurozone economy out of recession. “It will probably require additional unconventional measures from the ECB,” Lipton said, while Asmussen said monetary policy was not an “all-purpose weapon”. Further clouding the debate, German Chancellor Angela Merkel said if monetary policy were set for her country alone, rates would have to rise. “The ECB is in a difficult position. For Germany it would actually have to raise rates slightly at the moment, but for other countries it would have to do even more for more liquidity to be made available,” she said at a banking conference, in an unusually outspoken comment on central bank policy. Survey evidence this week suggested even the German economy is struggling, however, and its economy ministry forecast growth of just 0.5 per cent this year.
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A group of around 20 protesters opposed to austerity, gathered outside parliament yesterday calling for a referendum on the bailout. The man on the right urged people to eat his ‘Souvla of Awakening’. Parliament will vote on Tuesday to ratify – or not – a loan agreement with international lenders (Christos Theodorides) SEE STORY PAGE 5
Obama threatens ‘family tattoo’ if daughters get their own By Gabriel Debenedetti IF they were thinking about getting tattoos, the Obama daughters may want to reconsider. Speaking on NBC’s “Today” show in a segment originally filmed before the Boston Marathon bombings, President Barack Obama revealed the strategy he and First Lady Michelle Obama have been using to keep their daughters away from tattoos. “What we’ve said to the girls is, ‘If you guys ever decide you’re going to get a
tattoo, then mommy and me will get the exact same tattoo, in the same place, and we’ll go on YouTube and show it off as a family tattoo,’” Obama said.
‘SLIP OF THE TONGUE’ “Our thinking is that might dissuade them from thinking that somehow that’s a good way to rebel.” During the segment, the president also said he understood his wife’s “slip of the tongue” when she called herself a “single mother” in early April, noting that they were often
apart for a week at a time when he was campaigning for the Senate and presidency. “I tend to cut my wife or anybody some slack when it comes to just slips of the tongue,” he said. “But there’s no doubt that there have been times where Michelle probably felt like a single mom ... She definitely, I think, understands the burdens that women in particular tend to feel if they’re both responsible for child rearing and they’re responsible for working at the same time,” he added.