WASHINGTON ? (UPDATE 2) IMF Managing Director Dominique Strauss-Kahn warned governments against protectionism "through the back door" on Thursday, as they seek to prime their economies in the midst of the global economic downturn.
Speaking ahead of a G7 meeting in Rome on Friday, the International Monetary Fund boss said it was unlikely that government's would resort to openly protectionist measures -- notably raising tariff barriers -- but he said there was a 'really big" risk that the financial sector could be hit by a wave of protectionism.
"When governments provide some new resources or recapitalization of banks, they may add some comment saying that the money should stay at home," Strauss-Kahn warned.
He also pointed to the risk of '"buy national" provisions being attached to stimulus packages, like the one once considered by US lawmakers.
"You may have in different stimulus packages some comment or amendment saying that this money also should be used to buy national products, and these kinds of things. So this kind of protectionism may come back," he said.
His comments come as the US Congress takes the final steps toward approving a 789 billion dollar package aimed at priming the world's largest economy.
"The risk of a 'beggar your neighbor' policy is still high, and I think it is part of our job to explain that in no way in a global crisis (should there) be a domestic or national solution: we have to find a global response," he said.
In Rome, economic policymakers from the world's most industrialized nations are expected to compare notes on stimulus packages and try to forge a consensus on next steps.