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Spend or save, the UK dilemma

Smashing a piggy bankThe International Monetary Fund (IMF) has suggested that Britain may need to slow the pace of its austerity measures to lift the country's growth.

This has become a popular point of view, especially after Britain slipped back into recession and Prime Minister David Cameron stood by severe austerity measures.

The IMF’s report said: “Fiscal easing and further use of the government's balance sheet should be considered if downside risks materialise and the recovery fails to take off. If growth does not build momentum, planned fiscal adjustment would need to be reconsidered.”

The report recommends Britain should consider temporary tax cuts and more infrastructure spending if growth remains low.

Finance minister George Osborne welcomed the report but may have disappointed the business community when he insisted the quest for growth did not mean a change of course.

The IMF also said more stimulus was needed by the Bank of England. The bank has already pumped £325 billion of new cash into the UK economy since 2009 by purchasing assets under its quantitative easing programme.

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