US deficit 'is global threat'

THE International Monetary Fund sounded the alarm over the record US budget gap, saying that unchecked government red ink there could push up interest rates across the world.

Its warning came as Chancellor Gordon Brown - who is under pressure to curb burgeoning public sector borrowing in the UK - pledged to take a tough line on spending.

In a speech to the British Chambers of Commerce, he said the Government would lower the rate of spending growth while meeting its commitments to health and education. He said growth would slow to an average-of 2.5% between 2006 and 2008, from 4% in the four years to 2004.

Brown cheered the IMF's upward revision of its growth forecast for the UK economy to 3.5% - the top of his own predicted range.

The IMF forecasts global growth of 4.6%, fuelled by vigorous expansion in the US. But it said 'a sustained effort' may be needed to cut the US fiscal deficit, estimated at $521m for this year, and also warned about the record shortfall in the US current account.