The global economy is headed for a slowdown this year and Europe should cut interest rates, the International Monetary Fund said today.
"We are clearly looking at a substantial and broadly distributed slowdown in global economic growth this year but not, or at least not yet, at a recession," IMF chief economist Mr Michael Mussa said at a press conference today.
Mr Mussa was speaking at the launch of the IMF's world economic outlook paper. In the paper, the IMF said that Ireland is in danger of overheating and warned against tax cuts despite the current Irish exchequer surpluses.
The IMF said if the ECB cuts rates this year Ireland should "consider offsetting fiscal measures".
Mr Mussa was sharply critical of Europe's reluctance to introduce lower borrowing rates - in contrast to the US Federal Reserve's aggressive rate cutting this year.
Asked by reporters after the briefing to specify how he would like the European Central bank to begin relaxing its monetary policy, Mr Mussa said: "I would probably start with a 25 basis-point cut in short-term interest rates."
He said there were some grounds for hope a global recession could be averted and noted the Fed has sharply cut US interest rates and had room to lower them again if necessary.
But he took to task the 12 nations in euro zone region and suggested the ECB had room to start lowering interest rates last month.