IMF chief calls on members to save global economy

The managing director of the International Monetary Fund gave yesterday a rallying call to world leaders, urging them to take swift action against economic uncertainty to pre-empt another downturn. 

Speaking at the annual IMF members’ meeting in Tokyo, Christine Lagarde called for  “courageous action on behalf of our members” and warned about “the degree of uncertainty in many corners of the world – whether it is Europe or America”. 

During her speech, she commented on the ongoing Eurozone crisis, expressing concern about the “tall risks” presented by the economic situation in Europe.

In an apparent reversal of the orthodox IMF position, the former French Treasury minister called for a pause to austerity programmes in Europe, and implied doubts about their practicality and effectiveness, given the current financial constraints. 

“We don’t think it’s sensible to stick to nominal targets. We think it’s much more sensible to apply measures and let the stabilisers operate,” said Lagarde.

She expressed her concern about the level of spending cuts recently imposed by European governments, because it could hurt domestic economies and have an adverse effect on growth and employment. 

Lagarde was also worried that Eurozone debt troubles were spilling over to other areas and affecting prospects for emerging nations: “Whether you turn to Europe, to the United States of America, to other places as well, there is a level of uncertainty that is hampering decision makers from investing, from creating jobs.” 

Furthermore, she quoted an Oxfam study which shows that “a Eurozone break-up could cost the world’s poorest countries $30 billion in lost trade and foreign investment” before noting that “the IMF must work with poor countries to keep their fragile growth going, and […] boost counter-cyclical spending essential for social stability and growth”. 

The spotlight of this year’s Annual Meeting, however, will probably shine on Asia, as tensions continue to simmer between China and Japan over the disputed Senkaku Islands (Diaoyu, in China). 

The two Chinese top economic officials have failed to attend the meeting in what appears to be a diplomatic snub. The IMF managing director has called for more cooperation among members in the region.

Max Marioni