WASHINGTON (Reuters) – The head of the International Monetary Fund warned Friday that the United States would face a potentially “dangerous wave” of bankruptcy and unemployment if it did not maintain fiscal support until the coronavirus health crisis ended.
IMF director Kristalina Georgieva told reporters that the United States, the world’s largest economy, had room to take further action and that this would have positive spillovers for the global economy.
Asked if she supported President Joe Biden’s $ 1.9 trillion emergency relief plan, Georgieva said the IMF supported the plan’s focus on vaccinations, health care, support for the unemployed, and assistance to state and local governments.
Despite the economic recovery, Georgieva said risks persisted, especially if support was not maintained long enough.
“There is still a danger that if aid is not maintained until we have a lasting way out of the health crisis, there could be a dangerous wave of bankruptcy and unemployment,” she said.
In 2020, she said that the number of bankruptcies in the US was 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 when some companies fail. survived.
“We want careful, well-calibrated policy measures. We would like there to be policy support, ”she said, adding,“ Great care is needed so that we don’t end up in a difficult situation. “
Georgieva acknowledged the concerns of former Treasury Secretary Lawrence Summers about a possible overheating of the US economy, but said she was confident that new Treasury Secretary Janet Yellen would keep a close eye on these risks.
“We do indeed need to be vigilant about risk, but we have the best possible Secretary of the Treasury for this potential risk,” she said, “and I am confident that much thought will be given to anticipation and, if necessary, appropriate action. to address these risks. “
Reporting by Andrea Shalal; Editing by David Gregorio