The head of the International Monetary Fund, Dominique Strauss-Kahn repeated on Wednesday that governments should use extra budgetary stimulus measures to support flagging economic growth. Speaking before the Economic and Social Council, an assembly that advises the French government on economic and social questions, Strauss-Kahn said it was vital that countries resist the lure of trade protectionism.
"We really do not need a slowdown in world trade if we are going to maintain the little growth we can hope for," Strauss-Kahn said. "We should make progress there but, as with monetary policy, that isn't going to go very far in terms of supporting growth," he said.
"So today there remains one instrument which is adapted to the situation, because the risks of inflation are extremely slight, which is to say the budget," he said. After a series of big rate cuts by central banks around the world in recent weeks, economists and policy makers have increasingly urged governments to provide a boost in the form of fiscal stimulus despite already heavy public debt burdens.