THE UN Trade and Development has warned that fiscal austerity policies being implemented by countries are driving the global economy towards a recession. It has stressed that greater attention should be paid to high unemployment, which it called a more pressing problem than budgetary deficits.

“The vicious circle induced by fiscal contraction, weak financial institutions and financially fragile households is fuelling a crisis of confidence and holding back investment and job creation in the private and public sectors simultaneously,” the UN Conference on Trade and Development said in a policy brief published today.

The economic contraction will affect emerging and developing economies alike, it warned, stressing the need to prepare contingency plans.

The Group of 20 (G20) major economies initially seemed to recognize the threat of fiscal austerity to the global economy, but recent actions have not been consistent with that recognition, according to UNCTAD.