US faces risk of bankruptcy, unemployment if fiscal support is not maintained: IMF

FILE PHOTO: IMF Managing Director Kristalina Georgieva speaks at a press conference before the World Economic Forum (WEF) in Davos, Switzerland, January 20, 2020. REUTERS / Denis Balibouse / File Photo

WASHINGTON (Reuters) – The head of the International Monetary Fund warned on Friday that the United States is facing a possible “dangerous wave” of bankruptcy and unemployment if it does not maintain fiscal support until the end of the coronavirus health crisis.

IMF Managing Director Kristalina Georgieva told reporters that the United States, the world’s largest economy, has the opportunity to take further action, which would have a positive effect on the global economy.

Asked if she supports President Joe Biden’s $ 1.9 trillion aid plan, Georgieva said the IMF has supported the plan’s focus on vaccinations, health care, unemployment support and aid to state and local governments.

Despite the early recovery of the economy, Georgieva said the risks remained, especially if support was not maintained long enough.

“There is still that danger that if support is not sustained until we have a lasting way out of the health crisis, there could be a dangerous wave of bankruptcies and unemployment,” she said.

In 2020, she said US bankruptcies were lower than average in normal years due to tax support and it was important to further calibrate that support in 2021, carefully preparing for the time when some companies did not survive.

“We want to see careful, well-calibrated political action. We are eager for political support to be there, “she said, adding,” Special attention is needed so that we do not find ourselves in a difficult situation. “

Georgieva acknowledged concerns raised by former Treasury Secretary Lawrence Summers about a possible overheating of the US economy, but said she was confident that the new treasury secretary, Janet Yellen, would closely monitor these risks.

“Indeed, we need to be aware of the risks, but we have the best possible Treasury Secretary for this potential risk,” she said. “And I am confident that a lot of attention will be paid to anticipation and, if necessary, taking action. appropriate to address these risks. ”

Reporting by Andrea Shalal; Mountainous of David Gregorio