Explaining economic weakness: The IMF v Beecroft WHAT is the problem with the British economy? Are animal spirits dulled by too much regulation, making businesses wary of hiring? Or is the more pressing issue weak spending stemming from an overhang of debt, a shortage of credit and the threat of collapse in the euro zone, Britain's main export market? Two reports published this week offer contrasting supply-side and demand-side views. The first, written at the prime minister's behest by Adrian Beecroft, a venture capitalist, emphasises the "terrible impact" of rules that make it costly to fire workers. The work-shy are free to coast, harming efficiency, it says. Small firms are wary of hiring for fear they will be stuck with a duffer. Mr Beecroft proposes that firms should be able to sack staff without cause, so long as they give notice and a payoff linked to salary and service. Tiny firms, which cannot afford specialist staff to administer complex rules, should be exempt from many regulations. The Beecroft report reflects employers" fury about the difficulties of offloading a dud worker, and the lawyers who use the threat of court action to bargain for a bigger payoff. But as irksome as regulations are, they cannot readily explain the economy's underperformance. Britain's are among the least stringent job-protection laws: of the 40 countries in the index compiled by the OECD, only America and Canada have looser rules (see chart). And Britain's jobless rate has stayed remarkably low given economic weakness. By coincidence the report appeared the day before the IMF concluded its annual economic "mission" to Britain. The fund's take is rather different. It thinks the economy has too much slack, not too many slackers. It wants the Bank of England to begin another round of "quantitative easing" to boost demand. It is essential that Britain cut its large budget deficit, says the fund, though it would prefer a more growth-friendly tilt to austerity, such as cuts in public wages to pay for investment. The government should consider passing on its low borrowing costs to private firms and banks by buying their bonds. If none of this works and the darkest fears about the euro zone are realised, then budget cuts would have to make way for tax cuts and public works. In that event, it might make sense to copy Germany's response to the 2008 slump. It used temporary wage subsidies to make it easier for cash-strapped firms to keep workers - the opposite of the Beecroft fix, but the right one for the times.