IMF Forced Into U-Turn on Britain's Economic Plan
The International Monetary Fund (IMF) was forced into an embarrassing climbdown yesterday as it admitted Britain's 'Plan A' was working. Its Chief Economist said last year that Britain was "playing with fire" by adopting austerity but now they have upgraded growth figures.
In April 2013 Professor Olivier Blanchard echoed Labour's view that Chancellor George Osborne was cutting 'too far, too fast'. At the time the Keynesian Economist said about Britain: "I think conditions have deteriorated. There is no question that the fiscal plan - which was designed a few years back - was assuming that private demand would be stronger than it is.
"The danger of having no growth, or very little growth, for a long time is very high; you get a number of vicious cycles which come into play… the result is that [people] don't spend, output is low.
"And I think you're playing with fire when you get to very low growth rates"
When asked to respond to suggestions that British people believed their 'Plan A' austerity strategy was right, Blanchard said: "That I think that I am right and they are wrong."
However, yesterday the IMF had to change its assessment of Britain's economic outlook. They now say growth will be 2.9 percent in 2014, up for their projection of just 1.5 percent last year.
George Osborne said: "It is good news that the IMF forecasts that Britain is to grow faster and has been upgraded by them by more than any other Western economy this year, and that record numbers of jobs are being created. It is proof that the economic plan is working.
"And it is clear today that the growth deniers in the Labour Party are intent on talking down the British economy - and that is the greatest risk to recovery."
The present leadership of the IMF have been criticised for being too supportive of government spending as a way of boosting the economy.
In 2010 Blanchard's boss Christine Lagarde said that she had "trillion dollars on the table to confront any market attack that would target any country, whether it's Greece, Spain, Portugal, or anybody within the eurozone."
Both Blanchard and Lagarde are respected economists in France.