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."
