Too many Western countries ducking challenges, UK's Osborne says

By David Milliken

TOKYO, Oct 13 (Reuters) - Many Western economies are failing to face up to their responsibilities in the face of heavy economic headwinds, British finance minister George Osborne said on Saturday.

Speaking to reporters in Tokyo, where he is attending an annual meeting of the International Monetary Fund, Osborne, whose own economy is in recession, said the world economy faces a "triple threat" from the euro zone crisis, U.S. fiscal problems and a slowdown in emerging markets.

"There is less of an immediate sense of crisis at these meetings than there was at last year's annual meetings, but there is a greater concern about what lurks behind the next corner, a greater concern about the medium-term risks," he said.

"The lesson of what is going on in the world is that you have to confront your problems. Sadly too many Western countries seem to be ducking those challenges," he continued.

Osborne's remarks came at an IMF meeting where the United States and euro zone countries have argued about whether the debt crisis in countries such as Greece and Spain, or an imminent sharp U.S. fiscal contraction, pose a greater problem.

Emerging economies have also slowed sharply over the last six months, and earlier this week the IMF downgraded its global growth forecast.

Britain suffered the sharpest IMF downgrade for a major advanced economy, with the IMF forecasting it would contract 0.4 percent this year, and urging Osborne to delay some of his flagship austerity programme if growth disappoints further.


But Osborne reiterated that he had no intention of changing course from the deficit-reduction plans that form the cornerstone of the ruling coalition between his Conservative Party and the smaller Liberal Democrats.

"Western countries face a sink or swim question," he said. "In the UK we are ... confronting our problems and the reforms that are required and tackling our debts."

Slow growth over the past two years means that it will take at least two years longer than originally planned for Osborne to meet one of his debt-reduction goals, removing Britain's underlying budget deficit.

The IMF also forecasts he will miss another goal, putting net debt as a share of national income on a downward path by 2015. But it has urged him to let so-called automatic fiscal stabilisers - rising benefit payments and reduced tax receipts - support the economy rather than impose extra cuts in a slowdown.

Many economists predict that the government's budget watchdog, the Office for Budget Responsibility, will also forecast Osborne will miss this goal when he publishes its economic outlook on Dec. 5.

Osborne declined to comment on whether he would abandon the goal or impose extra cuts if needed.

"We are not saying that the automatic stabilisers will not be allowed to operate," he said. "That is a speculative question which I may or may not have to answer. You will have to wait for Dec. 5."

(Reporting by David Milliken; Editing by Neil Fullick/Jeremy Gaunt)

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