## Lagarde: "World Economy Not Out of Danger Zone"

_IMF Blog, February 26, 2012_

## Source details

**Canonical URL:** [Lagarde: "World Economy Not Out of Danger Zone"](https://www.imf.org/en/blogs/articles/2012/02/26/lagarde-world-economy-not-out-of-danger-zone)

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## Bibliographic details
- Published: February 26, 2012

---

### Global outlook and recent developments
- Statement date: February 26, 2012.
- IMF Managing Director Christine Lagarde: "Although a derailing of the global recovery has been avoided, the world economy is still not out of the danger zone."
- Positive developments cited:
  - "Derailment of the global recovery, which was a clear and distinct danger a few months ago, has been avoided for now thanks to strong policy measures--in particular those of the European Central Bank--and strengthened governance in the euro area, and reforms and adjustment in countries such as Italy, Spain, and Greece."
  - "High frequency indicators also now suggest an uptick in activity, mostly in the United States."
- Ongoing risks highlighted:
  - "the world economy is still not out of the danger zone"
  - Fragile financial systems.
  - High public and private debt.
  - Higher world oil prices.
  - Elevated unemployment: "Of equal concern is unemployment, which is still too high in many countries."

### Building global firewalls and IMF capacity
- Policy proposal: "we have suggested an increase in IMF lending capacity of US$500 billion, which would be combined with an equally credible, high quality and properly sized firewall at the European level."
- Implementation modalities discussed:
  - Agreement that an increase in IMF resources "could be done through bilateral borrowing and note purchase agreements."
  - Past precedent: "We have used this model before, and we know it can work quickly."
- Risk mitigation and safeguards:
  - "Clearly the primary safeguard to Fund resources will be, as always, sound economic programs and strong monitoring."
  - IMF Executive Board to "assess other risk mitigation policies in due course."
- Governance and reform:
  - "I welcome G-20 support for completing the 2010 quota reform agreement, and I urge countries to quickly ratify the measures necessary to implement this important agreement."

### Near-term policy agenda and meetings
- Next steps and timing:
  - "Concrete decisions will await the reassessment by euro area countries of their support facilities, planned for March."
  - Many key issues to be reviewed at the International Monetary and Financial Committee´s spring meeting in Washington in April.
  - Also to be considered at the next G-20 ministerial meeting "which will take place at roughly the same time, and the G-20 Summit of Heads of State and Government in June."
- Urgent call to action: "Until then, it is crucial that countries continue efforts to restore global growth."

### Key messages for policymakers
- Strengthen resilience to further shocks from fragile financial systems and high debt.
- Enhance IMF resources and create complementary European-level firewalls.
- Use bilateral borrowing and note purchase agreements as rapid means to increase IMF lending capacity.
- Maintain "sound economic programs and strong monitoring" as primary safeguards.
- Complete and ratify the 2010 quota reform agreement promptly.
- Continue reforms and fiscal adjustment in affected countries while addressing high unemployment.

*IMF Blog post: "Lagarde: 'World Economy Not Out of Danger Zone'", February 26, 2012.*

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## References

- [press statement](http://www.imf.org/external/np/sec/pr/2012/pr1258.htm)
- [clear and distinct danger](http://www.imf.org/external/pubs/ft/survey/so/2012/NEW012412A.htm)
- [resources](http://www.imf.org/external/np/exr/facts/finfac.htm)
- [risk mitigation](http://blogs.imf.org/2012/01/24/exit-danger-zone/)
- [2010 quota reform agreement](http://www.imf.org/external/np/exr/facts/quotas.htm)
- [International Monetary and Financial Committee´s](http://www.imf.org/external/np/exr/facts/groups.htm)
- [spring meeting in Washington](http://www.imf.org/external/spring/2012/)
- [build confidence](http://www.imf.org/external/pubs/ft/survey/so/2012/NEW012812A.htm)
- [Resources](http://www.imf.org/external/np/exr/facts/gabnab.htm)
- [need for moderation](http://blogs.imf.org/2012/01/29/fiscal-adjustment-too-much-of-a-good-thing/)
- [reform](http://www.imf.org/external/np/exr/govern/index.htm)

_Source: https://www.imf.org/en/blogs/articles/2012/02/26/lagarde-world-economy-not-out-of-danger-zone_