IMF’s Lagarde Warns World Economy Is in ‘Dangerous New Phase’
International Monetary Fund Managing Director Christine Lagarde repeated warnings that the world economy is in a “dangerous new phase” as policy makers fail to take the necessary measures to boost confidence.
“Exactly three years after the collapse of Lehman Brothers, the economic skies look troubled and turbulent as global activity slows and downside risks increase,” Lagarde said in the prepared remarks for a speech in Washington. “Without collective resolve, the confidence that the world so badly needs will not return.”
Lagarde, who took over the IMF leadership on July 5, said there’s too much debt in advanced economies, from governments to banks in Europe, and for householders in the U.S. The uncertainty adds to weak growth, fueling a vicious circle that is exacerbated by policy indecision, she said.
After almost two years combating the sovereign debt crisis focused on Greece, Ireland and Portugal, European policy makers have yet to reassure investors demanding higher yields from nations such as Spain and Italy. The European Central Bank today said it will lend dollars to euro-area banks in three separate three-month loans to ensure they have enough of the U.S. currency through the end of the year.
European nations must implement “credible fiscal consolidation” to face their rising borrowing costs, Lagarde said. Banks in the region need to make sure they have the sufficient capital buffers, she said.
-- Editors: Kevin Costelloe, Christopher Wellisz
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