WASHINGTON (AP) — The head of the International Monetary Fund is calling for indebted European countries to reduce spending only gradually to avoid further slowing their economies.
Christine Lagarde says in a speech in Zurich that countries should avoid cutting too steeply when their economies are contracting.
Governments "should not fight any fall in tax revenues ... caused solely because the economy weakens," she said.
Greece and other European countries have been trying to reduce their debt loads as a percentage of their economies. When they have cut deficits, their economies have shrunk. That makes it harder to reduce their deficits as a percentage of their economy, which some have agreed to as part of an international bailout.
Austerity should be "gradual and steady," Lagarde says.