The global financial crisis could lead to social unrest and even war, the head of the International Monetary Fund warned yesterday.
And he dealt a severe blow to Gordon Brown’s plans for another debt-funded Budget giveaway by warning that the money might melt ‘like snow in the sun’.
At a meeting of the International Labour Organisation, Mr Strauss-Kahn warned that the global economic crisis is ‘dire’ with the threat of millions being pushed into poverty.
The managing director of the global financial watchdog went on to warn governments against ploughing yet more fiscal stimulus into their ailing economies. He said: ‘You can put in as much stimulus as you want.
‘It will just melt in the sun as snow if at the same time you are not able to have a generally smaller financial sector than before but a healthy financial sector at work.’
The IMF has called on countries to pump 2 per cent of their gross domestic product into their economies in an attempt to reverse the global downturn.
Of the international situation, Mr Strauss-Kahn added: ‘Bluntly the situation is dire. All this will affect dramatically unemployment and beyond unemployment for many countries it will be at the roots of social unrest, some threat to democracy, and maybe for some cases it can also end in war.’
Chancellor Alistair Darling last week told MPs that 3.4 per cent of Britain's national wealth is already being spent on stimulating the economy.
The Prime Minister is said to want another large-scale stimulus, and is about to embark on a world tour to drum up support for his approach ahead of next month's G20 summit. But the Confederation of British Industry has also warned that the move is 'unaffordable'.
Instead it called on the Chancellor to concentrate on confidence-building measures to support jobs, businesses and investment through the recession.