IMF Survey: Time to Get Beyond the Crisis, Says IMF's Lagarde

IMF News, September 21, 2012

Source details

Canonical URL: IMF Survey: Time to Get Beyond the Crisis, Says IMF's Lagarde

IMF Managing Director Christine Lagarde calls for implementation of agreed decisions to move beyond the crisis in the eurozone and restore confidence in the global recovery.
Cooperative action—beyond cooperative talk—is required among all players, including implementing decisions already taken and those still needed.
The upcoming Annual Meetings will focus on further action needed to achieve sustainable and more inclusive growth.

The interview was published on September 21, 2012.
In early October, about 10,000 policymakers, business leaders, academics, civil society representatives, and journalists will gather in Tokyo to discuss the world economic outlook and policy responses.
The IMF will release its regular update of the World Economic Outlook on October 9.
The IMF’s policy steering committee will meet on October 13 to discuss further action needed to achieve sustainable and more inclusive economic growth.
Lagarde will preview the Annual Meetings agenda in a speech at the Peterson Institute for International Economics in Washington D.C. on September 24.

Implement agreed decisions to anchor medium-term expectations about economic policy.
Move beyond the crisis in the eurozone by asserting a medium-term plan for countries like the United States and Japan and addressing root causes, especially in the financial sector.
At national level: pursue reforms to improve competitiveness, remove barriers to value and job creation.
At regional level (Europe): implement short-term actions consistent with the European Central Bank framework and set a vision for a real currency zone complemented by a banking union and a fiscal union; anchor expectations about Europe’s future configuration.
For the United States: address the short-term fiscal cliff (automatic fiscal [tax] cuts and withdrawal of public spending early in 2013) and anchor medium-term fiscal expectations to tackle deficit and debt issues.
For emerging markets: recognize that previously steady drivers of global growth are now being affected by the global crisis and experiencing slower growth (though growth remains high in countries like China, Brazil, and India).
For low-income countries (sub-Saharan Africa): acknowledge strong growth in many countries but monitor threats from commodity price increases (notably food and energy) and decreases for raw-material producers that could threaten balance of payments.
Use the IMFC as a forum for coordination, comparing notes, sharing ideas, and focusing on exiting the crisis and achieving more sustainable and inclusive growth.

Europe:
- Described as the epicenter of the crisis where the most urgent, coordinated action is needed.
- Requires action at national and regional levels; short-term implementation guided by the European Central Bank framework and a long-term vision including banking and fiscal unions.
United States:
- Faces short-term risk from the fiscal cliff (automatic fiscal [tax] cuts and public spending withdrawal early in 2013) that could contract growth and threaten the global economy.
- Needs anchoring of medium-term fiscal policy to address deficit and debt.
Emerging markets (Asia and elsewhere):
- Had been driving global growth and were less affected initially but are now experiencing slower growth; China, Brazil, and India still exhibit high growth but at lower rates.
Low-income countries (sub-Saharan Africa):
- Show strong growth and reform efforts (e.g., on subsidies) but face commodity-price related risks—food and energy price increases in some countries and raw-material price decreases in others.

Implementation work has progressed significantly in the last twelve months toward the 2010 reform package.
First quota threshold: quotas totaling 70 percent of the total were required for the quota reform to be implementable; that threshold has been exceeded ("We are beyond 70 percent").
Governance reform thresholds:
- Need support from 113 countries; progress is "very close" and hope expressed to reach this threshold in Tokyo.
- A separate threshold relates to the percentage of votes; efforts are ongoing to approach the finishing line in Tokyo.

Asia is highlighted as a large part of global GDP with steady recent growth and a strong partner for the IMF.
Japan singled out for substantial support: major contributor to technical assistance and a frequent financial contributor (quota increase, New Arrangements to Borrow, bilateral loans), and a prompt contributor when the IMF needed to build a firewall.

Source: IMF Survey, September 21, 2012.