IMF pushes for consolidation of major economies

IMF urges major economies to push on with consolidation

Wed Oct 31, 2012 2:20AM GMT

International Monetary Fund (IMF) chief Christine Lagarde has said that developed economies must push on with fiscal consolidation to decrease long-term debts.

Lagarde made the remarks in Berlin on Tuesday after holding separate meetings with German Chancellor Angela Merkel and a number of heads of world economic agencies such as the World Trade Organization (WTO) and the World Bank.

She also called on emerging economies to loosen up fiscal and monetary policy to boost up their dipping growth.

The governments of advanced economies “need to continue fiscal consolidation at a sensible pace to address debt long term,” Lagarde said.

She stated that the industrialized states had dealt with the financial crisis by maintaining moderate growth while developing nations had contributed more to global growth.

“I would characterize the situation as that of a laborious recovery out of the financial crisis through some degree of stabilization by way of tepid growth,” the IMF chief noted, adding that slower growth is affecting emerging markets now.

She said emerging markets “need to loosen their monetary and fiscal tightening to accommodate what growth there is”.

Merkel also expressed doubts over global economic recovery. “The economic growth outlooks are not as good as we would hope.”

“We are talking about the things that still need to be solved and here it became clear that the global economy’s risks are very evident, as is clearly stated in the communiqué. The economic growth outlooks are not as good as we would hope,” the German chancellor told a news conference after the meeting.

The long-drawn-out eurozone debt crisis, which began in Greece in late 2009 and reached Italy, Spain, and France in 2011, is viewed as a threat not only to Europe but also to many of the world’s other developed economies.

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