Amid Franco-German Clash IMF Chief Warns: Eurozone,
"The Epicenter" of Global Economic Worries, More Growth Cuts
By Countercurrents.org
25 September, 2012
Countercurrents.org
As Angela Merkel, German chancellor, and Francois Hollande, French president, clashed Saturday over plans to allow the EU's rescue funds to lend directly to banks instead of through member countries, which would add to their debt woes Christine Lagarde, IMF chief, warned: The eurozone remains "the epicenter" of global economic worries, and global growth would "likely be a bit weaker" than anticipated.
Reports [1] in media said:
Problems in the eurozone and worries about the US economy continued to weigh on investors' confidence, said Mrs. Lagarde. She said the US must avoid plunging off a fiscal cliff of deep government spending cuts and tax increases that could cause another recession and harm the global economy.
She also warned of a slowdown in some of the emerging economies that previously bolstered global economic growth. The global economy "is still fraught with uncertainty", she said.
The warnings and observations are expressions of the world economy's vulnerable condition.
Mrs. Lagarde called Monday for urgent action from policy makers in Europe and the US to brake a slowing world economy. "My main message today" is "the urgent need to implement the policy actions required to secure the global recovery," she said in a speech at a Washington think tank – the Peterson Institute for International Economics.
She pointed to an urgent need for a eurozone banking union, a commitment made by EU leaders in June that has foundered in Franco-German disputes. The banking union "should be initiated as soon as possible -- to break the vicious cycle between banks and sovereigns," she said.
The IMF boss welcomed the ECB's decision this month to buy unlimited number of bonds from distressed eurozone states. "It was clearly a turning point" in the crisis, she said.
Without naming Greece or Portugal she underscored the tough challenges for eurozone countries to implement rescue programs to get their economies back on track. "The international community must recognize the huge efforts being made by these countries, and provide them with the support they need, including financing," said Lagarde.
On Friday, the Greek representative on the IMF board said that Europe must bear the costs of any additional funding for Greece 's IMF-EU bailout program. Thanos Catsambas, in an interview with Kathimerini newspaper, said: "The IMF has exhausted its possibilities to extend the loan beyond the amount approved last March."
Source :
[1] Sept. 25, 2012, The Sydney Morning Herald , “IMF calls for action on global slowdown”, http://www.smh.com.au/business/world-business/imf-calls-for-action-on-global-slowdown-20120925-26hwy.html ; news.com.au , “IMF likely to cut global growth estimates”, http://www.news.com.au/business/breaking-news/imf-likely-to-cut-global-growth-estimates/story-e6frfkur-1226480686535 ; and Sept. 24, 2012, BBC , “ IMF's Christine Lagarde warns of more global growth cuts”, http://www.bbc.co.uk/news/business-19707887
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