By William Schomberg and David Milliken
LONDON, July 17 (Reuters) - The IMF renewed its calls onBritain's government to do more to boost its sluggish economybut finance minister George Osborne was boosted by support frommember countries of the Fund for his austerity push.
"The economy remains a long way from a strong andsustainable recovery," staff at the International Monetary Fundsaid on Wednesday as it expanded on an initial report onBritain's economy published in May.
The Fund said the government's belt-tightening to date hadbeen the most severe among the world's big, rich economies, eventhough Osborne has pushed back some of his targets for tacklingthe country's fiscal mess.
"Despite flexibility, consolidation has hurt growth," theIMF said in an annual assessment.
Osborne locked horns with the IMF earlier this year when itbecame clear the Fund was losing patience with his determinationto stick to a package of spending cuts.
But there was some good news for him last week when the Fundraised slightly its forecast for Britain's growth this year.
And on Wednesday, he got another boost when a majority ofthe Fund's directors - who represent national governments -sided with him on the austerity question, disagreeing with theirown staff's recommendations.
"Most directors underscored the importance of keeping fiscalconsolidation on track to preserve credibility, not least inlight of the persistent weakness of the fiscal position," theFund said in a news release.
In its staff report, the Fund estimated the push to fixBritain's gaping budget deficit had wiped out at least 2.5percent of gross domestic product on a cumulative basis.
It outlined measures to boost growth including bringingforward planned spending on infrastructure.
The IMF also sounded a note of caution on how much could beachieved through aggressive stimulus measures undertaken byBritain's central bank, a key part of the Conservative-ledgovernment's strategy for getting the economy back on track.
"Without fixing other things (the BoE) is pushing on stringto some degree," IMF economist Alasdair Scott told reporters.
A spokesman for the Treasury, responding to the IMF report,said the government would "continue to confront head on" thecountry's economic problems.
Britain's economy is expected to grow 0.9 percent in 2013,according to the latest IMF forecast, up from 0.2 percent lastyear.
Some private economists are pencilling in slightly highergrowth this year after recent signs that the recovery might begathering a bit of speed.
The IMF said Britain should try to capitalise on the signsof recovery by taking advantage of low borrowing costs andweakness in the labour market.
"We think policy should take advantage of this nascentrecovery, notably fiscal policy," Krishna Srinivasan, the IMF'smission chief to Britain, told reporters.
Tax incentives to boost investment and get more people backto work were generally too small and in some cases would taketoo long to implement, the IMF said.
It repeated its call on the government to set out a clearstrategy to return state-rescued banks Lloyds and RBS to privatehands and said it should be ready to offer additional capital.
While British banks were generally in better health thantheir EU peers, they were in markedly worse shape than U.S.banks, the IMF report said.
Lloyds (LLOY)