US ambassador questions speed and scale of Osborne’s cuts

US ambassador Louis Susman has questioned the wisdom of George Osborne's massive spending cuts, warning they risked plunging Britain into a double-dip recession.

US ambassador Louis Susman has questioned the wisdom of George Osborne’s massive spending cuts, warning they risked plunging Britain into a double-dip recession. His remarks echo those of leading economists at the IMF last week, who said the US and EU economies remained too fragile to absorb major deficit cuts, concluding that additional spending and tax breaks would be a much more sensible strategy.

Susman, in an interview with the Telegraph, praised the chancellor’s determination to eliminate the deficit in a single parliament as “very admirable”, but warned:

“The question is, is it too much, too fast? We worry about double-dip recession and the lack of growth.”

Today’s Mirror adds:

“He then heaped further embarrassment on the Tory-led coalition by saying President Obama was using similar plans to Labour’s to wipe out the huge US deficit. His warning came as Labour leader Ed Miliband announced plans for a £2billion tax on City fatcats’ obscene bonuses to save the economy from ruin.

“Mr Susman spoke out ahead of next week’s Budget when Mr Osborne is expected to admit the battered UK economy will grow by less than expected this year. Alarming figures recently showed it shrank at the end of 2010 – even before the Coalition’s painful austerity measures, including raising VAT to 20%, hit…

“The ambassador pointed out President Obama is planning for economic growth of 3.5% while halving the US deficit by 2013. That goal is like the Labour commitment, made at last year’s general election, to halve the UK deficit before the next election rather than wiping it out in one go.”

Last week, former US Under Secretary of Commerce for Economic Affairs Robert Shapiro called on world leaders to heed the lessons of history:

“Much of the developing world learned the painful lessons of the 1997-1998 Asian financial crisis. So, their policymakers imposed new limits on leverage, and their financial institutions passed on investing in the toxic assets that brought down the U.S. and European economies…

“The Great Depression produced a large sheaf of institutional reforms which have helped the world avoid a repeat ever since. Yet, the Nobel Laureates and other experts gathered this week by the IMF also agreed that the United States and Europe have yet to undertake comparable reforms that would make another global financial crisis less likely.

“If we don’t, they warned, another financial crisis almost certainly will befall America and Europe in the foreseeable future.”

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