UK may need to change course - IMF
The Government must be poised to quickly change course if the economy worsens, the head of the IMF has warned.
Christine Lagarde said the UK's stance remained "appropriate" but "the heightened risk" meant a need for a "heightened readiness to respond".
Ms Lagarde, speaking alongside Chancellor George Osborne at the Chatham House think-tank in London, said: "The policy stance remains appropriate. But the heightened risk means a heightened readiness to respond, particularly if it looks like the economy is headed for weak growth and high unemployment."
Ms Lagarde said the risks from stagnating growth were increasing, and had to be weighed against risks of sovereign debt. Although tackling deficits was crucial, "we also know that consolidation, if it happens too quickly, will hurt the economy and worsen job prospects".
There is also "room" for action on monetary policy, indicating support for another round of quantitative easing - effectively printing money - by the Bank of England.
Shadow chancellor Ed Balls said he expected the message from the IMF behind the scenes to be "rather more blunt". He added: "Christine Lagarde is right to repeat her warning that cutting too quickly will hurt the recovery and jobs and that there is scope for reducing deficits more steadily to support economic growth.
"This is clearly a message aimed squarely at America, the eurozone and Britain too. It comes as no surprise that, despite those clear warnings, the IMF has diplomatically shied away from contradicting our Chancellor in public - at least for now."
Speaking from the G7 summit in Marseille on Friday night, the Chancellor said: "The strong feeling from today's talks has been support for credible fiscal consolidation plans for countries with high budget deficits like the one we have in Britain.
"There has also been broad support for the package that President Obama announced yesterday, with an understanding that the US faces different constraints because of the dollar's role as the global reserve currency.
"What's important now is a concerted international agenda to deal with the global debt crisis and support growth along the lines I set out this morning in London with Christine Lagarde, the Managing Director of the IMF. I think we are making good progress towards that goal."