IMF says worst not over

By Mike Peacock
LONDON (Reuters) - The head of the IMF questioned on Monday debate about when to roll back stimulus spending, saying the world economy had yet to weather the worst of a recession that claimed a record number of European jobs.
The 16-country euro zone lost a record 1.22 million jobs in the first quarter, official data showed. The number of employed fell 1.2 percent year-on-year, the deepest annual drop since measurements started in 1995. [nLF389614]
"Markedly weakening labor markets are a major threat to recovery prospects in the euro zone," said Howard Archer, economist at IHS Global Insight.
Data were little better in the United States.
The factory sector in New York state shrank at a more severe rate in June than the previous month, the New York Federal Reserve said in a report. [nN15768]
The New York Fed's "Empire State" general business conditions index fell to minus 9.41 in June from minus 4.55 in May. The survey of manufacturing plants in the state is one of the earliest monthly sign posts to U.S. factory conditions.
Further underlining the fragile state of the global economy, an influential economist said China would not see a rapid rebound and South Korea's finance minister said its economy was still sliding, although the pace had slowed.
But in southern Italy, Group of Eight finance ministers meeting at the weekend described their economies in the most positive terms since the collapse of U.S. bank Lehman Brothers nine months ago heightened the world's worst financial crisis since the Great Depression of the 1930s.
"Their (G8) stance is that we are beginning to see some green shoots but nevertheless we have to be cautious," International Monetary Fund chief Dominique Strauss-Kahn said during a visit to Kazakhstan. "The large part of the worst is not yet behind us."
PRESSURE BUILDING
Pressure has been building in the G8, particularly from fiscally conservative nations such as Germany and Canada, for plans to wind down stimulus as soon as it is no longer needed.
But ministers in Lecce differed over how quickly to start rolling back state spending plans and hiking interest rates.
Treasury Secretary Timothy Geithner indicated the United States was unlikely to tighten policy soon, saying: "It is too early to shift toward policy restraint."
Writing in the Washington Post on Monday, Geithner said a sweeping financial regulation reform plan to be released this week would target capital requirements, securitization and other problem areas blamed for the global financial crisis.
The largest and most interconnected firms could expect to face more stringent requirements. Continued...
Source: Reuters