IMF URGES STIMULUS TO HELP `DIRE´ JOB MARKET

At a conference co-hosted by the IMF and the InternationalLabour Organisation, visiting Spanish Prime Minister Jose LuisRodriquez Zapatero said high unemployment may trigger a "crisisof confidence" in Europe.

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

The labour market is in dire straits," IMF ManagingDirector Dominique Strauss-Kahn told the one-day meeting, addingthat the Great Recession had left a "wasteland of joblessness"."We must acknowledge that the crisis will not be over untilunemployment declines significantly," he said, calling growthand jobs the "most urgent problems".

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

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

"We have to bring new oxygen into our democraticinstitutions," Greek Prime Minister George Papandreou said.

European Commissioner for Employment and Social AffairsLaszlo Andor said 2010 had been an "annus horribilis" forunemployment. "If we fail to act ... 2011 may still turn out tobe the annus horriblis for social cohesion."

Jobs over debt

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

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

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

In developed countries, jobless people had worse healthproblems and their children performed worse at school, while inpoor 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 calledon governments to extend measures to foster a still "fragile"global economic recovery and job creation.

But Iain Duncan Smith, Britain's Secretary of State for Workand Pensions, disagreed, telling Reuters: "We're at the stagewhere everyone is throwing out a lot of stimulus, but to lesserand 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 economyso it won't have room to grow."

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