UPDATE 1-IMF urges stimulus to help "dire" job market

* Says long-term unemployment costlier than extra stimulus

* EU faces confidence crisis if jobless rate high: Zapatero

* IMF also backs extending jobless benefits, work incentives

* UK says to cut stimulus, which “less and less” effective

By Walter Gibbs and Gwladys Fouche

OSLO, Sept 13 (BestGrowthStock) – The world’s rich countries need to
extend fiscal stimulus and job growth initiatives to fix a
“dire” labour market that could threaten entire societies, the
International Monetary Fund said on Monday.

At a conference co-hosted by the IMF and the International
Labour Organisation, visiting Spanish Prime Minister Jose Luis
Rodriquez Zapatero said high unemployment may trigger a “crisis
of confidence” in Europe.

The IMF said more and more workers worldwide were unable to
find jobs for longer periods, weakening social cohesion and
raising risks of unrest and even undermining democracy.

“The labour market is in dire straits,” IMF Managing
Director Dominique Strauss-Kahn told the one-day meeting, adding
that the Great Recession had left a “wasteland of joblessness”.
“We must acknowledge that the crisis will not be over until
unemployment declines significantly,” he said, calling growth
and jobs the “most urgent problems”.

Zapatero said longer periods of high unemployment could set
off a confidence crisis in the European Union, which has been
rocked by high debt and financing fears from Greece to Portugal.

“The worst crisis would be a crisis of pessimism, of a lack
of confidence, of resignation. Europe must not fall into that,”
he said, adding that job training would be the top priority for
Spain, where 20 percent of the workforce is without a job.

“We have to bring new oxygen into our democratic
institutions,” Greek Prime Minister George Papandreou said.

European Commissioner for Employment and Social Affairs
Laszlo Andor said 2010 had been an “annus horribilis” for
unemployment. “If we fail to act … 2011 may still turn out to
be the annus horriblis for social cohesion.”


The IMF said that extended fiscal stimulus was worth the
additional debt if it helped cut long-term unemployment, which
poses an even costlier burden on society as workers get
discouraged, lose lifetime earnings or leave the labour market.

The IMF said that due to the deep crisis, it now backs
schemes to extend unemployment benefits to help maintain demand
and morale, and to give short-term incentives to companies to
retain more workers but at reduced hours and wages.

Strauss-Kahn defended the IMF’s focus on jobs and concerns
over the impact of long-term unemployment, saying it was a
“misleading caricature” to think that the fund cared only about
the austerity cuts usually associated with its programmes.
He said unemployment was “about far more than just a pay

In developed countries, jobless people had worse health
problems and their children performed worse at school, while in
poor states unemployment was often a matter of life and death.
It could lead to violent conflict, “even war”, he said.

The leader of the International Labour Organisation called
on governments to extend measures to foster a still “fragile”
global economic recovery and job creation. [ID:nLDE68B09T]

But Iain Duncan Smith, Britain’s Secretary of State for Work
and Pensions, disagreed, telling Reuters: “We’re at the stage
where everyone is throwing out a lot of stimulus, but to lesser
and lesser effect.”

“We think it’s time to start pulling that back,” he said.
“If it goes on, we will start to squeeze out the private economy
so it won’t have room to grow.”

For a factbox on IMF’s views on how to create more jobs,
click on [ID:nLDE68B09U]
(Additional reporting by Alister Doyle, Joachim Dagenborg and
Wojciech Moskwa; Editing by Ruth Pitchford)

UPDATE 1-IMF urges stimulus to help "dire" job market