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Austerity a ‘drag’ on economy – IMF

The UK economy is still a long way from “a strong and sustainable recovery”, the International Monetary Fund (IMF) has warned.

Austerity measures could be offset by more infrastructure spending, it suggested.

Speaking at a press conference in London, deputy managing director, David Lipton, said: “It would be, in our view, useful for the economy for infrastructure and other measures to be brought forward to reduce the drag of austerity measures... and provide more support for the economy.”

However, the recommendations would not involve more spending over the medium-term.

“The recommendations we have made today are fiscally neutral. We're suggesting that within the multi-year medium-term framework that the government has laid out that it should advance infrastructure spending to provide more support for the economy.

“But that said... one has to evaluate the impact on policies on the economy as you go so whether the present medium-term framework turns out to be an appropriate one when measured next year or the year after remains to be seen.”

Chancellor George Osborne said the UK would not “duck its economic challenges”.

But shadow chancellor Ed Balls said: “Behind the diplomatic language, this is the call for action on jobs and growth that the IMF has been threatening to deliver for many months and a stark warning of the consequences if the chancellor refuses to listen.

“The IMF is clear that we are a long way from the strong and sustained recovery we need, and backs the warnings we have made for three years that the Government's plans are a drag on growth and risk doing long-term damage.”

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