{
  "title": "IMF Survey: Lagarde Calls For Urgent Action So 2012 Can Be ‘Year of Healing’",
  "publication": "IMF News, January 23, 2012",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sonew012312a",
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  "summary": "IMF Managing Director Christine Lagarde called on the international community to take urgent collective action to save the world economy from a downward spiral. Europe, which is at the center of global concerns, needs stronger growth, larger firewalls, and deeper integration, she said.",
  "publishDate": "2012-01-23",
  "sections": [
    {
      "heading": "Overview",
      "content": "- IMF Managing Director Christine Lagarde called for urgent collective action to prevent a downward spiral in the world economy and said “2012 must be a year of healing.”\n- Europe is identified as the center of global concerns and needs stronger growth, larger firewalls, and deeper integration.\n- The IMF said it was ready to help and was seeking to increase its lending resources by up to $500 billion.\n- The IMF estimates that in coming years, additional global financing of potentially $1 trillion could be needed.\n- Eurozone countries have already pledged to provide up to $200 billion in new financing for the IMF."
    },
    {
      "heading": "IMF financing and cooperative approach",
      "content": "- Goal: “step up the Fund’s lending capacity” to supplement resources Europe will provide and to meet needs of other countries affected by the crisis.\n- IMF estimate of additional global financing potentially needed: $1 trillion.\n- IMF target to boost its lending resources by up to $500 billion.\n- Eurozone pledge toward IMF financing: up to $200 billion.\n- Emphasis: “A cooperative path means that all countries must work together with a common diagnosis toward a common solution.”"
    },
    {
      "heading": "Europe — Three imperatives to restore confidence",
      "content": "- Three imperatives Lagarde identified: stronger growth, larger firewalls, and deeper integration.\n\n- Stronger growth\n  - Concern: euro area economy slowing sharply and inflation already declining, creating risk it will fall well below target next year and raise debt burdens.\n  - Policy recommendations:\n    - Additional and timely monetary easing to reduce deflation risk.\n    - Prevent banks from contracting credit under market pressure by focusing on raising capital levels rather than cutting back lending to boost capital ratios.\n    - Fiscal policy: recognize that some countries must tighten sharply and quickly while “there is a large core where fiscal adjustment can be more gradual.”\n    - Structural reforms to boost competitiveness and long-term growth.\n\n- Larger firewalls\n  - Rationale: without a larger firewall, fundamentally solvent countries like Italy and Spain could be forced into solvency crises by abnormal funding costs.\n  - Policy recommendations:\n    - Fold the EFSF into the ESM, increase the size of the ESM, and identify a clear and credible timetable for making it operational.\n    - ECB action to provide necessary liquidity support to stabilize bank funding and sovereign debt markets.\n    - Break the vicious cycle of banks hurting sovereigns and sovereigns hurting banks by restoring adequate bank capital levels and restoring confidence in sovereign debt.\n\n- Deeper integration\n  - Short-term proposal: a pan-euro area facility with capacity to take direct stakes in banks to help break the bank–sovereign link.\n  - Further financial integration measures: unified supervision, a single bank resolution authority, and a single deposit insurance fund.\n  - Fiscal integration: “The euro area also needs greater fiscal integration—it is not tenable for seventeen completely independent fiscal policies to sit alongside one monetary policy.”\n  - Complement the “fiscal compact” with some form of fiscal risk-sharing; financing options include creation of euro area bonds or bills or a debt redemption fund as proposed by the German Council of Economic Advisors."
    },
    {
      "heading": "Role of other major economies",
      "content": "- United States\n  - Has special responsibility as the world’s largest economy and center of the global financial system.\n  - Recommendations: relieve household debt burdens through programs to make mortgage debt sustainable and act decisively to bring down tomorrow’s deficits without bringing down today’s economy.\n\n- Japan\n  - As the world’s third largest economy, should put in place a credible plan to bring down public debt and undertake reforms to raise long-term growth.\n\n- Emerging and advanced countries with large current account surpluses (including China)\n  - Should encourage more domestic demand to support global growth.\n  - Specific recommendation for China: continue to shift growth away from exports and investment toward consumption."
    },
    {
      "heading": "Key messages and quotations",
      "content": "- “The longer we wait, the worse it will get. The only solution is to move forward together. Our collective economic future depends on it.”\n- “We must all understand that this is a defining moment. It is not about saving any one country or region. It is about saving the world from a downward economic spiral.”\n- “Now the world must find the political will to do what it knows must be done.”\n\nIMF Survey: Lagarde Calls For Urgent Action So 2012 Can Be ‘Year of Healing’\n\n---\n\n Content in this bundle\n\n- New012312aapdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- New012312acpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- New012312afpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- New012312ajpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- New012312arpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- New012312aspdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- In The News\n- Read the speech\n- Press release on IMF resources\n- Fixing flaws in EMU\n- Blog: Europe’s dilemma\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sonew012312a"
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    "Published: January 23, 2012",
    "IMF Managing Director Christine Lagarde called for urgent collective action to prevent a downward spiral in the world economy and said “2012 must be a year of healing.”",
    "Europe is identified as the center of global concerns and needs stronger growth, larger firewalls, and deeper integration.",
    "The IMF said it was ready to help and was seeking to increase its lending resources by up to $500 billion.",
    "The IMF estimates that in coming years, additional global financing of potentially $1 trillion could be needed.",
    "Eurozone countries have already pledged to provide up to $200 billion in new financing for the IMF.",
    "Goal: “step up the Fund’s lending capacity” to supplement resources Europe will provide and to meet needs of other countries affected by the crisis.",
    "IMF estimate of additional global financing potentially needed: $1 trillion.",
    "IMF target to boost its lending resources by up to $500 billion.",
    "Eurozone pledge toward IMF financing: up to $200 billion.",
    "Emphasis: “A cooperative path means that all countries must work together with a common diagnosis toward a common solution.”",
    "Three imperatives Lagarde identified: stronger growth, larger firewalls, and deeper integration.",
    "Stronger growth",
    "Larger firewalls",
    "Deeper integration",
    "United States",
    "Japan",
    "Emerging and advanced countries with large current account surpluses (including China)",
    "“The longer we wait, the worse it will get. The only solution is to move forward together. Our collective economic future depends on it.”",
    "“We must all understand that this is a defining moment. It is not about saving any one country or region. It is about saving the world from a downward economic spiral.”",
    "“Now the world must find the political will to do what it knows must be done.”",
    "[New012312aapdf (PDF)](/-/media/websites/imf/imported/external/arabic/pubs/ft/survey/so/2012/new012312aapdf.pdf){rel=\"external\" type=\"application/pdf\"}",
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    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[In The News](https://www.imf.org/en/news/search)",
    "[Read the speech](https://www.imf.org/external/np/speeches/2012/012312.htm)",
    "[Press release on IMF resources](https://www.imf.org/external/np/sec/pr/2012/pr1213.htm)",
    "[Fixing flaws in EMU](https://www.imf.org/external/pubs/ft/fandd/2011/12/jaumotte.htm)",
    "[Blog: Europe’s dilemma](http://blog-imfdirect.imf.org/2011/10/21/growing-pains-europes-dilemma/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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