IMF’s Lagarde sees dark clouds on horizon
Friday, 20 April 2012 | 00:00
“Dark clouds” have gathered over a “timid” global economic recovery, said IMF Managing Director Christine Lagarde on Thursday.
“There is a fragile situation with still high risks,” Lagarde said at a press conference at the start of the IMF/World Bank spring meetings.
Europe remains the “epicenter” of the downside risks, Lagarde said. In additional to renewed stress, banks are shrinking to shore-up their capital. Lagarde said officials in the region have to “keep up” the pace of reform.
Lagarde defended the euro zone’s recent reforms, saying the region has clearly improved its firewall to contain the spread of contagion.
Funds from the firewall funds are available to help Spain address the country’s ailing banks, Lagarde said.
She said the IMF supports the aid going directly to the banks and not through the Spanish government.
Lagarde is moving to boost IMF resources to deal with potential spillovers from the crisis.
Earlier, Lagarde said that the IMF had raised $320 billion so far from euro zone and other countries to boost IMF resources. The goal is to reach $400 billion by the end of the weekend.
“We have others in the pipeline,” Lagarde said.
At a separate press conference, World Bank President Robert Zoellick said that Spain and Italy need help.
“Further actions are going to be called for,” Zoellick said, because the European Central Bank’s $1.3 trillion of emergency loans to the banking system “is about at the end” of their effectiveness.
“It would certainly help if they got some support...so as to help with growth and the politics of reform,” he said.
Zoellick said he was worried that deleveraging in European banks was causing a shrinkage of global trade finance.
This will hurt exporters in sub-Saharan Africa, he said.
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