The U.S. budget deficit is “truly excessive” and the world’s leading economy must resolve the problems linked to the imbalance, the head of the International Monetary Fund said in remarks published on Sunday.
Writing in Italy’s La Stampa newspaper, IMF director general Rodrigo Rato also said that some European countries needed to loosen their labor laws to boost the economy, and that Japan should capitalize on reforms the government has made.
“America must resolve the problems linked to its budget deficit, which is now truly excessive,” Rato wrote.
The U.S. budget deficit hit successive records in the past two fiscal years, which President Bush blamed on a 2001 recession, the Sept. 11 terrorist attacks and the U.S. military response. Democrats say Bush’s tax cuts also widened the gap.
During his re-election campaign, Bush said he would halve the budget deficit in five years but, since then, U.S. Treasury Secretary Snow has been less specific about the time frame.
In his wide-ranging essay, Rato also urged Latin American countries to strengthen their fiscal positions and bring their debt-to-GDP ratios to “within tolerable limits.”
Challenge: Older populations
He also warned that aging populations were one of the biggest economic challenges ahead and said that last year’s spike in oil prices should persuade nations to use different sources of energy and to save as much power as possible
“Many oil producing countries must be wiser in how they use their profits, giving priority to the reduction of public debt. They must also improve transparency,” he said.
Rato said it was “time to take decisions and not only present proposals” to tackle world poverty.
