'The International Monetary Fund has cut its 2011 UK growth forecast, delivering a pre-election blow to the Government.
The Washington-based fund said it expected the UK economy to grow by 2.5pc next year, compared with an earlier forecast of 2.7pc. It maintained its 2010 prediction at 1.3pc growth in its latest World Economic Outlook report.
The IMF’s view of the British economy in 2011 is significantly more downbeat compared with the Government’s, after the Chancellor predicted a 3.25pc increase in gross domestic product in the Budget in March.
The gulf between the forecasts will add fuel to the political debate just two weeks before the general election on May 6. '
And also that:
'Spiralling sovereign debt in Europe, the US, and Japan has emerged as the top threat to the world economy and risks setting off a fresh financial storm, the International Monetary Fund has warned.
...
Countries with "outsized deficits and an unsustainable debt trajectory" that rely on foreigners to buy their bonds can run out of time quickly. The danger comes at "trigger dates" when clusters of debt maturites fall due, a problem that has hit Greece this year.
The Fund said there was a risk of "standoffs" as investors hold out for higher rates from defiant states. This could lead to "an unresolved solvency crisis", a veiled warning that some rich states may ultimately default.'
No wonder that The Telegraph also reports that:
'George Osborne, the shadow chancellor, and Ken Clarke, the shadow business secretary, predicted that the bond markets would collapse while the parties “haggled” over possible coalitions, leading to the intervention of the IMF.
Mr Clarke warned that the public had failed to appreciate the seriousness of the election given the troubled state of the economy, and the full consequences of an indecisive result and a hung parliament.
He said: "Not every single member of the electorate seems to realise how serious this election is.
"Bond markets won't wait. Sterling will wobble. We have seen even minor flickers in the opinion polls causing problems with interest rates in the recent past.
"If the British don't decide to put in a government with a working majority, and the markets think that we can't tackle our debt and deficit problems, then the IMF will have to do it for us."
Having been elected as an MP for the first time in 1970, Mr Clarke said that he could remember the “disaster” of the Lib-Lab pact of 1977, and how the government had been forced to turn to the IMF to sort out the nation’s finances for the only time in British history.
“It was a farce, it was a fiasco, it didn't save us from disaster,” he said.
"And I would be very, very alarmed if any prospect of that occurred on this occasion.
"This [the state of the economy] is worse than the Conservatives took over in 1970, worse than Labour took over in 1974, worse than we took over in 1979, and it really is going to require strong, purposeful government confident of its majority to put things into place."
Mr Osborne added: "It is a statement of fact that the last time - indeed the only time - the IMF came in was when the governing party did not have a workable majority in Parliament, which was in the late 1970s.
"And I don't think people should underestimate the economic consequences of political instability in this country at a time when we are running one of the largest budget deficits in the developed world, when people have questioned our credit rating, and when we can see that there is a very, very serious problem with unemployment and business confidence.
"So that is a very, very serious challenge, and political instability, a hung parliament - people need to be aware of the consequences of that." '
Makes perfect sense to me and also explains why Gold is looking increasingly like a safe haven.
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