IMF: U.S. must tackle 'fiscal cliff' to stem global slowdown

International Monetary Fund economic counselor and research director Olivier Blanchard announces the world economic outlook at a press conference in Tokyo on October 9, 2012.

The International Monetary Fund says economic growth is slowing down sharply and that even the U.S. recovery is at risk. The IMF says the world economy will only expand at a rate of 3.3 percent this year -- which is three tenths of a percent lower than previously thought.

Stagnation in the euro zone, the fragile recovery in the U.S., and the slowdown of emerging economies, such as China, India, and Brazil, are all coinciding at once to contribute the bleak global growth outlook, despite proactive central bank policies around the world.

"Even after very strong actions by central banks -- the U.S. Federal Reserve, the European Central Bank, the Bank of Japan -- the job is not done," says Marie Diron, chief economist at Ernst & Young, "the key word in the IMF report today is 'uncertainty'."

In the euro zone, the IMF blames government for uncertainty because leaders have failed to solve the debt crises and may have made matters worse with austerity. In the U.S., the IMF is calling on congress to tackle the upcoming 'fiscal cliff' that will take effect at the start of next year.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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