MercoPress. South Atlantic News Agency
Euro crisis: IMF chief warns of a “lost decade”; China calls for strong political will
Lagarde has still to convince a skeptical China of supporting the aid package The head of the IMF warned on Wednesday that Europe's debt crisis risked plunging the global economy into a “lost decade” and said it was up to rich nations to shoulder the burden of restoring growth and confidence.
On a two-day visit to China Lagarde also alerted that the global economy risked plunging into “uncertainty and financial instability”.
Christine Lagarde told a financial forum in Beijing that European plans to bolster a rescue package for Greece were a “step in the right direction,” but that the outlook for the world economy remained dangerous and uncertain.
“There are clearly clouds on the horizon. Clouds on the horizon particularly in the advanced economies and particularly so in the European Union and the United States,” Lagarde said.
“Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand... we could run the risk of what some commentators are already calling the lost decade.”
The “lost decade” reference carries echoes of Japan's experience of persistent deflation, mounting debts and economic impotence through the 1990s and beyond after its real estate bubble burst -- an outcome many analysts fear could be repeated given the debt and property origins of Europe's problems.
Lagarde said she was hopeful that the technical details of a European Union plan to boost the European Financial Stability Fund (EFSF) to around 1 trillion Euros from its present 440 billion Euros would be ready by December.
European policymakers are hopeful that big emerging economies, led by China, will invest some of their vast foreign exchange reserves to help end a debt crisis that has engulfed Greece threatens bigger economies such as Italy.
But there is scepticism in China, where public opinion is firmly against bailing out countries that still enjoy far higher average incomes than Chinese.
Chinese policy makers also worry that European plans are “not complete and not firm,” according to a commentary on China's official Xinhua news agency. It criticized a lack of political will, politicians' concerns over their own re-election and a lack of coordination between EU members.
“Like a patient, if several organs are in trouble, taking drugs or surgeries will produce toxic side effects and will largely reduce the desired effectiveness. That's exactly what's happening in Italy and Greece,” the commentary said.
Top Comments
Disclaimer & comment rules-
-
-
Read all commentsWell here we are .clouds on the horizon grey if you have capital as it might not work efficiently for you,black clouds if you don't with only your to be devalued labor power to sell.this time it is clearly not because labor power that was overpriced which has caused the problem but equally clearly a problem within capitalism.the working class where ever they maybe will pay.in Greece in positioning of the needs of capital clearly top the agenda as a economist as prime minister is acceptable as a posture to address it's debt problem.then legarde expects countries with surpluses,eg brazil,should take a big role in promoting demand.you can be sure they don't mean by increasing domestic wage levels,but by importing importing the debts of wealthier countries.nothing new is it.
Nov 10th, 2011 - 02:11 pm 0“The 'lost decade' echoes Japan's experience of persistent deflation, mounting debts and economic impotence through the 1990s and beyond after its real estate bubble burst --
Nov 10th, 2011 - 04:38 pm 0- an outcome many analysts fear could be repeated given the debt and property origins of *Europe's* problems.”
Hell, I didn't realise that Europe had created its own problems in isolation.
My reading of the situation is that the *United State* precipitated the present world financial crisis because of rampant selling of real estate on unreliable credit to people who would be unable to pay off the loan and the interest if anything went wrong. This was only mirrored to a lesser degree in Europe - especially in those European countries where a mortgage culture doesn't exist.
In the UK - where such a culture does exist - the problem was always going to be very serious.
So much so that me and a million others were constantly lobbying the Government, the banks/lenders, the Bank of England and the Financial Services Agency to avert the approaching storm using the mechanisms that they had available - to no avail; it was election time and the Labour Party was intent on letting things rip and borrowing like there was no tomorrow.
Luckily, macroeconomically, the UK's GDP offers a lot of resilience - conspicuously absent in the southern European countries.
But it still needs the 'push-pull' of retrenchment of public expenditure whilst targetting key sectors for funding to stimulate development and re-focus the national employment profile.
These words (above), whilst true, are impersonal;
the truths at the level of the family are extremely painful, and my family is certainly feeling the pain big-time.
Come On People! Australia and Bahamas need persons, YOU HAVE STRONG BENEFITS AS A PART OF COMMONWEALTH, you have an incredible future for your childs. These lands are waiting for you!!!!
Nov 10th, 2011 - 09:31 pm 0Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!