International Monetary Fund Chief Christine
Lagarde warned Monday that global growth continues to deteriorate and
governments -- especially in Europe -- need to carry out promises to
make needed economic reforms.
"We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July, and our forecast has trended downward over the last 12 months," Lagarde said in a speech in Washington.
She repeated the IMF's longstanding warning of "the urgent need to initiate, execute, implement the policy actions required to secure the global recovery."
Lagarde said that "uncertainty in the eurozone remains the greatest risk to the global economy today."
She said that the eurozone needed to initiate a strong and effective banking union, establish a single supervisory mechanism and enable the direct recapitalization of banks. Lagarde repeated calls for implementing the firewall of the European permanent bailout fund, the agreed plan for fiscal union and country-by-country reforms to promote growth, jobs and competitiveness.
The Washington-based crisis lender is to issue its regular World Economic Outlook on October 9, ahead of its twice yearly joint meetings with the World Bank, to be held in Tokyo.
Lagarde called for the US Congress to act to head of the yearend "fiscal cliff," when current law would see huge budget cuts and income tax increases taking effect. The combination would rapidly narrow the federal government's 1-trillion-dollar annual budget deficit, but is projected to also cut economic growth by 2 percentage points, enough to possibly throw the United States from a slow recovery back into recession.
"We all recognize that political calendars impact the timing of key decisions," Lagarde said. "But the current uncertainty presents a serious threat for the United States and, as the world's largest economy, for the global economy."
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