“They have room to maneuver if things worsen and they will have to see what the economic circumstances are,” Lipton said in an interview with Sara Eisen on Bloomberg Television’s “Market Makers.”
Global recovery will continue as long as the U.S. doesn’t go over the fiscal cliff and Europe “plugs away at its problems,” he said in the interview from Jackson Hole, Wyoming.
Lipton said the U.S. must avoid going over the fiscal cliff, which he said the IMF has estimated would cut as much as 4 percentage points from gross domestic product.
The nonpartisan Congressional Budget Office said Aug. 22 that scheduled tax increases and spending cuts in 2013 would lead to economic output shrinking, unemployment rising, and conditions that would “probably be considered a recession.”
On Europe, Lipton said the European Central Bank needs to ensure that monetary policy transmission mechanisms work. He said it is “an open subject” whether the IMF would need to assist in a bond buying plan for Europe.
EBC Executive Board member Joerg Asmussen said yesterday the IMF should be involved in setting conditions for countries applying for bond-buying aid from Europe’s bailout fund.
“Europe has to decide that,” Lipton said, regarding the IMF’s role. “Right now, Draghi has not been specific. I imagine he’ll have more to say in the future, maybe even when they meet next week,” he said. “Spain has not asked us for a program so we’re not in the business of preparing one,” he said.
Representatives of the IMF and the other members of the so- called troika, including the European Commission and the European Central Bank, return to Athens next week to review Greece’s progress in meeting the terms of its 240 billion euros of bailout loans.
Euro-area unemployment was 11.3 percent in July, the European Union’s statistics office in Luxembourg said today. That matches the prior month’s rate as the highest since the data series started in 1995.
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