No One Will Be Safe From The Eurozone Crisis, Warns IMF Chief

By: EW News Desk Team   Date: 16 December 2011

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16 December 2011

IMF Managing Director Christine Lagarde has called on all the nations around the world to come to the eurozone’s aid, warning that a failure to act collectively could eventually lead to protectionism and isolation reminiscent of the 1930s depression.

"There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating," cautioned Lagarde, as cited by Reuters, while speaking at a conference by the US State Department.

"It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action."

Related: Divided We Fail – The World Needs Quick And Collective Action: Christine Lagarde

Related: Times of Trouble: Can Christine Lagarde Lead the IMF Through its Toughest Period?

Related: Why The IMF Must Stay Out Of Europe’s Crisis: Mario Blejer & Eduardo Levy Yeyati

The former French Finance Minister added that the time was now for nations’ leaders to “accept the truth” and take a holistic approach toward addressing their systemic weaknesses, such as those underscored by the current euro zone debt crisis.

"It's a question of actually facing the issues, not being in denial, accepting the truth, accepting the reality, then dealing with it," said Lagarde, as quoted by the Wall Street Journal.

"It is going to require efforts, it is going to require adjustment, and clearly it is going to have to start from the core of the crisis at the moment, which is obviously the European countries and in particular the countries of the euro zone," added Lagarde.

The IMF has warned that it is likely to cut its growth projections for 2012, with the economy struggling with a worsening two-year euro zone debt crisis and sluggish US growth. There are also signs from falling Chinese factory output that manufacturers are struggling with waning global demand and tighter credit conditions.

Last week, European leaders at the EU summit agreed to contribute an extra 200 billion euros to the IMF to "help deal with the crisis". Lagarde’s latest statements, though, appear to be an appeal to the emerging markets, such as Brazil and China, for more cash. She did not, however, provide details on what actions she expected individual countries or the IMF to take.

International support should be channeled through the IMF for “organizing a collective financial responsibility, a fiscal solidarity and that element of risk-sharing that is expected, pretty much, around the globe,” said Lagarde.

Related: Remedies For An Ailing Economy - How To Avert A Crisis: Nouriel Roubini

Related: Globalisation Demands Better, More Effective, Governments: Jeffrey D. Sachs

Related: SOS – The Eurozone Can No Longer Save Themselves: Raghuram Rajan

Financial markets should also allow time for individual nations to work through the political process to arrive at a solution before reacting negatively, added Lagarde.

"It would be ideal and it would be lovely from a market perspective if it was not just currently but immediately signed, sealed and delivered, done deal, overnight," she said. "Unfortunately, for those of you who have the privilege of belonging to democracies, things do not happen in that way and things do take time and have to go through parliamentary processes."


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