MercoPress. South Atlantic News Agency

IMF warns no economy in the world will be immune to the crisis unfolding

Euro zone the core of the trouble said Lagarde

The world economic outlook is “quite gloomy” and will require action by all countries, starting with those in Europe, to head off an escalating crisis that carries risks of a global depression, the head of the International Monetary Fund said on Thursday.

“The world economic outlook at the moment is not particularly rosy. It is quite gloomy,” IMF head Christine Lagarde said at the US State Department.

“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” Lagarde said.

“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.”

Lagarde noted some relative economic bright spots in the countries of Asia and Latin America, which she said had taken, with IMF help, steps during crises in the 1980s and 1990s to address weaknesses in their banking systems and financial regulatory frameworks.

“All those challenges that they faced in the days of the Asian crisis, of the Latin American crisis have now served them well,” Lagarde said.

She said global economic leaders now needed to take a holistic approach toward addressing systemic weaknesses, such as those underscored by the current Euro zone debt crisis.

“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,” Lagarde said.

She cautioned, however, that democratic government processes often made quick fixes difficult saying the collision of market expectations with political reality must be resolved.

“It is really that Gordian Knot that needs to be cracked, that needs to be addressed as collectively as possible, starting with those at the centre but with the support of the international community probably channelled through the IMF,” she said.