IMF head flags US budget, Europe defense spending challenges
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IMF Managing Director Kristalina Georgieva warns that the United States’ ballooning budget deficit and falling social mobility could undermine economic growth.
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International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks during a news conference at the International Monetary Fund (IMF) headquarters in Washington, April 25, 2025 (AP)
International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Wednesday that the United States' "ballooning" budget deficit, a problem which could weigh on economic growth, might eventually pose a significant risk if it is left unsolved.
"Are they Americans in the audience? I mean, we are an international community, but I hope they are. I hope that you guys are taking this. We need to carry people with us to solve a problem that otherwise is going to hang on our neck and drag the economic growth down," Georgieva stated ahead of the annual IMF and World Bank meetings set for next week.
The IMF chief also urged the US and other countries to explain to their people, clearly and directly, that a ballooning deficit and increased public spending are not necessarily beneficial for them and could, in fact, lead to negative economic consequences.
Social mobility prospects in the US declining: IMF managing director
She also noted that the prospects for social mobility in the US are steadily declining, meaning residents today have a lower chance of improving their socioeconomic status compared to their parents.
"In the US, your chances of growing up to earn more than your parents keep falling. Here too, discontent has been evident - and has helped precipitate the policy revolution that is now unfolding, reshaping trade, immigration, and many international frameworks," Georgieva stated.
She added that this frustration, while evident in the United States, is not an isolated issue but rather part of a broader global trend, which in turn fuels unrest and instability all around the world.
"Many people in many places - especially the young - are taking their disappointment to the streets: from Lima to Rabat, from Paris to Nairobi, and from Kathmandu to Jakarta, all are demanding better opportunities," the IMF chief said, pointing to the scale of the issue.
Increasing defense spending poses a challenge for EU
On the topic of defense spending in Europe, the IMF Managing Director highlighted that stepping up defense spending amid the ongoing Russia-Ukraine conflict presents a considerable and pressing difficulty for the region.
"The biggest challenge for Europe is to get into the reality that they have pressure to spend more on defense. The Russian war in Ukraine has been devastating with significant consequences on public spending in Europe," she stated during a conversation at the Milken Institute in the United States.
Additionally, she pointed to the necessity of creating more space for private companies, with a specific focus on enabling the growth of small firms.
