The head of the International Monetary Fund said in an interview broadcast Monday that uncertainty over the Eurozone's fiscal crisis and the so-called fiscal cliff in the U.S. are reasons why the world economy has been slowing.
In Europe the question is how and when the crisis will be
addressed and resolved, and in the United States it is how and when
the fiscal cliff will be addressed, Christine Lagarde told CBS News.
She also noted long-term factors for economic policies developed
in countries such as the US and Japan.
"Those are factors of uncertainty that really prevent people from
making the investment decisions, the hiring decisions, the foreign
direct investment decisions that would otherwise help growth and the
world over," Lagarde said.
The former French finance minister also said the United States
faces the risk of sliding back into recession.
Congress last month avoided action on the complicated debate of
the pending fiscal cliff - the description being used for 600 billion
dollars worth of automatic budget cuts and tax increases that will
occur on December 31 if no action is taken.
Debate has been postponed until after the November 6 elections.
Economists say there could be devastating impact including
increased unemployment and a possible downgrade of the government's
debt.
"The fact that the housing market is picking up is in our view a
clear sign the situation is improving," Lagarde said.
The IMF is expected to announce next week that it is lowering the
forecast for world economic growth to 3 per cent this year, CBS said.
