This economic funk won't go away until the eurozone crisis is fixed In any case, confronted by Western economies still struggling to return to growth, the IMF has reversed tack and now seems again to be advocating fiscal expansionism, or at least a slowing of consolidation plans. Even the great enforcer Wolfgang Schauble seems somewhat to have softened his disciplinarian approach. The German finance minister says he feels everyone's pain, and through his sidekick at the European Commission, Olli Rehn, is busy granting more or less any eurozone country that cares to ask an extension to deficit reduction targets. As in Britain, the point at which countries return to balanced budgets is being pushed ever further into the future. For opponents of austerity, it seemed almost too good to be true when previously influential research by Carmen Reinhart and Kenneth Rogoff - which concluded that economic growth falls off sharply when national debt reaches 90pc of gross domestic product - was found to be seriously flawed. Final victory over the forces of fiscal conservatism seemed complete. Well, I'm all in favour of easing people's pain, even when the pain is well deserved, but is more deficit spending really the answer to the Western world's economic funk? Can it honestly make sense for a country which still has one of the fastest rates of public debt accumulation in the OECD to be again loosening the fiscal purse strings? In any event, to think that a little more demand management in the British economy is going to make a blind bit of difference when there is full-blown nuclear meltdown going on across the Channel is frankly risible. That the IMF should focus on an irrelevant "solution" while almost wholly failing to address the elephant in the room - the failing euro - is bizarre to the point of grossly stupid and can only really be explained by the continuing state of denial among Europe's leaders, highly influential as they still are at the IMF. They simply cannot bring themselves to admit that their lifetime's work has failed. One of the reasons why the IMF has shifted its focus back to fiscal solutions is the apparent failure of monetary policy to generate the looked-for recovery. With fiscal leeway extremely limited, central banks became the only game in town. Yet belatedly, the IMF has now become quite concerned about the unintended consequences of unconventional monetary policy. Central bank money-printing may or may not have saved the world from depression and deflation when the financial crisis was at its height, but now it seems good for nothing other than financial speculation. Certainly it is not generating any growth . In a speech to the IMF, Lorenzo Bini Smaghi, a former executive board member at the European Central Bank, eloquently articulated some of these negatives, including the re-emergence of asset price bubbles. "We can envisage a world in which inflation remains low but the accommodative monetary policy of the central bank creates asset bubbles which burst before inflation even materialises," he said. The burst itself generates deflationary pressures in the goods markets which then requires that the central bank keeps a very accommodative monetary policy. In such a world, there would be bouts of financial instability which negatvely affect the real economy and justify maintaining rates low for even longer. What is more, the prop of accommodative monetary policy removes the incentive for medium-term fiscal adjustment, which in turn creates uncertainty about future levels of taxation and thereby undermines present spending and investment. Just as worrying, the negative real interest rates generated by central bank money-printing create the illusion that there is no need, nor pressure, for budgetary adjustment. Unfortunately, it is just such an illusion which the IMF seems to have fallen for. The UK, and indeed the world economy, will not properly recover as long as the eurozone crisis continues. Why would you invest and spend while this sort of uncertainty persists? This is not a crisis likely to be solved either by fiscal discipline or fiscal laxity. Nor can monetary policy do anything more than provide limited covering fire. Not until eurozone leaders are forced to confront the true nature of the problem - that the euro cannot work in its present form - can there be anything like a lasting solution. Mr Osborne can only pray that the British public understands these constraints, for he is under ever more pressure either to do something stupid himself, or move over and let someone else do it instead.