São Paulo – This Wednesday (9th), the managing director of the International Monetary Fund (IMF), Christine Lagarde, warned of the risk of a ‘downward spiral’ of economic uncertainty and financial instability. During a visit to China, Lagarde stated that unemployment rates remain “unacceptably high” in developed countries, and that nations and financial authorities must seek a solution to the crisis together.
“If we do not act, and act together, we could enter a downward spiral of uncertainty, financial instability, and a collapse in global demand. Ultimately, we could face a lost decade of low growth and high unemployment,” said Lagarde. She said that while other regions of the world are still struggling to recover from the crisis, Asia is rebounding. Still, like any other region, the continent is not free from suffering the consequences of this crisis.
To the IMF’s managing director, several actions are being taken to fight the crisis. As a case in point, she mentioned the agreement signed on October 26th by Euro Area leaders to address the Greek crisis, recapitalize European banks, strengthen the firewall against financial contagion, and lay the foundations for robust economic governance in the Euro Area.
Lagarde, said, however, that other countries are also affected by these challenges, and that a strong, sustainable, balanced recovery must be pursued by advanced economies. “It means pushing ahead with structural policies to boost competitiveness and employment; and strengthening financial regulation to make the financial sector safer and to put it back in the service of the real economy.”
Lagarde praised the Asian countries, but said that there are “dark clouds” gathering in the global economy, and they must watch them carefully. She said China has been keeping its economic policy on the right path, but that now it must encourage domestic consumption and strengthen its currency.
*Translated by Gabriel Pomerancblum
