State debt to become ‘biggest problem’: IMF chief

DAVOS, January 30, 2010 (AFP) – IMF chief Dominique Strauss-Kahn said Saturday that state debt will become the world’s biggest economic problem and some countries will need seven years to fix their finances. “The fiscal sustainability problem is going to be one of the biggest, maybe the biggest problem for the coming … several years,” Strauss-Kahn told the World Economic Forum in Davos.

“We’ll have to deal with this for five, six or seven years, depending on the country,” he said.

Strauss-Kahn’s comments came as worries over Greece’s debt woes clouded the Davos forum, where Greek Prime Minister George Papandreou has been trying to reassure markets that his country will act to beat its debt crisis.

The United States and many other developed countries also have major budget deficits as they pump in extraordinary sums to stimulate their economies during the global slowdown.

As the global economy begins to recover, the debate has turned from how much stimulus to inject to when to end pump priming, particularly since the cash measures have increased deficits.

Strauss-Kahn noted that even if continuing stimulus packages could exacerbate debt, the risk of ending them too early was greater