Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Finance Chiefs Appeal for U.S. to Avoid From Fiscal Cliff

Finance Chiefs Call on U.S. to Steer Away From Fiscal Cliff
Christine Lagarde, managing director of the International Monetary Fund (IMF), front row center, poses with IMF governors during a group photo session at the Annual Meetings of the IMF and the World Bank Group in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg

The U.S. is facing pressure to avoid running off its fiscal cliff amid warnings that failure to change course would trigger another global recession.

“People are concerned,” U.K. Chancellor of the Exchequer George Osborne told reporters yesterday at the International Monetary Fund’s annual meeting in Tokyo. “There was quite a lot of discussion.” The IMF’s steering committee today said resolving the challenge is “essential.”

The U.S. will incur $100 billion in automatic spending cuts and more than $500 billion in expiring tax reductions in January, unless lawmakers strike a deal. The IMF this week said such a consolidation would tighten fiscal policy by 4 percent of gross domestic product, the most since the 1940s.

That’s powerful enough to ricochet around the world economy as a recovery from the 2009 recession already shows signs of weakening, said Canadian Finance Minister Jim Flaherty.

“It’s a very serious situation for all of North America and for the entire world,” Flaherty told Bloomberg Television on Oct. 11. “It means we’ll all go into recession. So it’s important this gets dealt with.”

Failure ‘Unacceptable’

Failure to craft a solution “is not acceptable at all,” Bank of America Corp. Chief Executive Officer Brian T. Moynihan said in an interview in Tokyo. “It’s important that it’s done sooner rather than later. We’ve been feeling it since last summer; to take that uncertainty away is key.”

U.S. Treasury Secretary Timothy F. Geithner said on Oct. 11 he agreed a delay isn’t a “responsible” strategy and that any accord should allow for deficit reduction over time and open up room for shorter-term investment.

“We’re going to take a run at it,” he said.

The International Monetary and Financial Committee, which serves as the steering panel for the IMF, said in a statement today that “resolving the fiscal cliff, raising the debt ceiling, and making progress toward a comprehensive plan to ensure fiscal sustainability are essential.”

Brazil again criticized the Federal Reserve for embarking upon another round of asset purchases. Finance Minister Guido Mantega said such a policy is “selfish” because it hurts emerging markets such as his by subjecting them to volatile capital flows and currency movements.

Brazil’s Take

“Brazil, for one, will take whatever measures it deems necessary to avoid the detrimental effects of these spillovers,” he said.

With next month’s presidential election capturing the attention of U.S. politicians, a bipartisan group of senators met this week to debate ways to reach a long-term deficit-reduction agreement. President Barack Obama has said he wants to allow scheduled tax increases on the wealthy. Republican challenger Mitt Romney opposes any rise.

The most likely outcome is a “two-step dance,” Vincent Reinhart, Morgan Stanley’s chief economist and a former Fed official, told a banking conference in Tokyo. Congress will extend almost all the provisions and promise more fundamental changes later, he said.

Plan Needed

“At present, the U.S. has a lot of credibility, the U.S. government has a lot of credibility, the fiscal account doesn’t yet suffer from this correction, but this will not last forever,” Carlo Cottarelli, the IMF’s director of fiscal affairs, said on Oct. 9. “So there is a need for a plan.”

Bundesbank President Jens Weidmann identified the fiscal cliff as one of the reasons for the global economy being “in a difficult situation.” French Finance Minister Pierre Moscovici told reporters that the U.S. economy is “very solid.”

“I am sure they’ll find the way to climb their fiscal cliff,” he said.

Some signaled confidence that lawmakers will reach an agreement. South Korea Finance Minister Bahk Jae-Wan expressed “irresponsible optimism,” while World Bank President Jim Yong Kim said he’s “optimistic.”

“This is a real test of leadership for legislators in the U.S.,” Kim said to Bloomberg Television. “After this election is over, it’s very important that they take positive steps.”

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.