Britain to clock 0.6 per cent growth: IMF

Britain will muddle through with 0.6 per cent growth this year, marginally less than the 0.7 per cent forecast by the Office for Budget Responsibility. It is expected to rebound to 2 per cent next year.

The US and China will continue to be the two main growth blocs in the world economy with the US growing at an unchanged 1.8 per cent and China speeding ahead at 8.2 per cent, down from 9 per cent.

The draft of the IMF report says, ''The most immediate political challenge is to re-establish confidence and put an end to the euro area crisis, supporting growth." The text may, however, be altered to accommodate last-minute changes.

The IMF, in a bid to ease the monetary conditions, urged the ECB to move in the direction of a ''more accommodative monetary policy", to prevent a credit squeeze as European banks shrink their balance sheets to meet tougher capital ratios by June.

In its January bulletin, the ECB said loan growth had slowed but there was no sign yet of a "sizeable curtailment of credit".
 
Meanwhile, in Brussels, an initial draft of the EU's new treaty said no country would be able to tap the permanent bailout fund or European Stability Mechanism unless they signed the pact committing them to near-balanced budgets, with little leeway for deficits even after an economic shock.
 
The text is seen to refer particularly to Ireland, which may have to conduct a referendum on the new treaty. If the Irish return a 'No' vote as is said to be likely, given the current fractious mood – it would block aid disbursements under Ireland's EU-IMF loan package, once the new bail-out fund was up and running.

According to critics, the move was a pressure tactic to get Dublin pass the treaty through secondary legislation without a vote.