WASHINGTON (Reuters) – The head of the International Monetary Fund warned on Friday that the United States would face a possible “dangerous wave” of bankruptcies and unemployment if it did not maintain fiscal support until the coronavirus health crisis ended.
IMF managing director Kristalina Georgieva told reporters that the United States, the largest economy in the world, has room to take further action and, in doing so, would have positive side effects for the global economy.
Asked whether he supported President Joe Biden’s $ 1.9 trillion relief plan, Georgieva said the IMF supported the plan’s focus on vaccinations, health care, support for the unemployed and help for state and local governments.
Despite the nascent recovery in the economy, Georgieva said the risks remain, especially if support is not maintained long enough.
“There is still a danger that if support is not sustained until we have a lasting exit from the health crisis, there could be a dangerous wave of bankruptcies and unemployment,” she said.
In 2020, she said that US bankruptcies were lower than average in normal years due to fiscal support and that it was important to continue to calibrate that support in 2021 while carefully preparing for the time when some companies would not survive
“We want careful and well-calibrated political action. We are looking forward to political support, “she said, adding:” You need to be very careful not to find yourself in a difficult situation. “
Georgieva acknowledged the concerns raised by former Treasury Secretary Lawrence Summers about a possible overheating of the US economy, but said he was confident that the new Treasury secretary, Janet Yellen, would keep a careful eye on those risks.
“In fact, we have to be aware of the risks, but we have the best possible Treasury secretary for that potential risk, she said:“ And I am confident that much attention will be paid to anticipating and, if necessary, taking appropriate measures to deal with these risks. “
Andrea Shalal reporting; Editing by David Gregorio