IMF chief warns US of ripple effect of 'fiscal cliff'

WASHINGTON Fri Dec 7, 2012 5:23pm EST

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WASHINGTON Dec 7 (Reuters) - The head of the International Monetary Fund urged U.S. policymakers on Friday to consider the implications for the rest of the world of failing to reach a deal to avoid the "fiscal cliff."

"If the U.S. suffers as a result of the fiscal cliff - a complete wiping out of growth - it is going to have repercussions around the world," IMF Managing Director Christine Lagarde told the BBC in an interview.

"If the U.S. has 2 percent less growth, there will probably be 1 percent less growth in Mexico and in Canada, probably less so in Europe and Japan, but there will be ripple effects outside the U.S.," she added.

The Obama administration and congressional leaders are trying to negotiate a deal to avoid the so-called fiscal cliff of $600 billion in tax hikes and federal spending cuts that will begin to take effect at the beginning of 2013..

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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