'Do I have to go down on my knees': Christine Lagarde apology over wrong IMF forecast on UK economy
Published 08/06/2014 | 15:20
Christine Lagarde has asked whether she needs to grovel on her knees before George Osborne over the IMF’s incorrect warnings on the UK economy, as she warned against raising taxes.
“Do I have to go on my knees?” Ms Lagarde, the head of the International Monetary Fund said, when asked whether she has apologised to George Osborne over the fund’s low growth forecasts and calls to adopt a ‘Plan B’ of less austerity – calls the body now accept it got wrong.
The growth the UK is enjoying now has “resulted” from George Osborne’s policies, she said. The growth now appears to be “pretty sustainable” because it is being driven by private sector investment as well as households consuming more.
A year ago Oliver Blanchard, the IMF’s chief economist, warned Mr Osborne was “playing with fire” with austerity and downgraded Britain’s growth forecast to just 0.7pc for 2013. Instead, it grew by 1.7pc, and is expected to hit 2.7pc this year.
“We got it wrong,” Ms Lagarde told the Andrew Marr Show. “We acknowledged it. Clearly the confidence building that has resulted from the economic policies adopted by the government has surprised many of us.”
“We said very clearly that we had underestimated growth for the U.K. and that our forecasts had been proven wrong by the reality of economic developments,” she said.
Pressed on whether she had apologised to Mr Osborne for the incorrect forecasts, she said: “Do I have to go on my knees?”
Ms Lagarde rejected calls from the European Commission for higher taxes.
“The mixture between tax and spending cuts is something that we regard as fairly balanced and at the right mix. We don’t see a massive increase in tax as recommendable at the moment.”
The two chief risks to the economy are low productivity and rising house prices, but houses are not yet a bubble, she said.
Ms Lagarde dismissed speculation she could be the next president of the European Commission, saying: “The only position that has not been debated for me has been the Vatican.”