The International Monetary Fund is urging governments to provide insurance against large recessions like the one the world is sinking into at present.

In a report titled Fiscal Policy for the Crisis, the IMF suggests the public sector should offer to insure businesses and individuals to stop them putting their investment plans on hold in financial crises, because this worsens economic slowdowns.

“The government could provide insurance against extreme recessions by offering contracts, with payment contingent on GDP growth falling below some threshold level,” the IMF said.

“Widespread use of such contracts would provide an additional automatic stabiliser because payments would be made when they are most needed – namely in bad times.”