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IMF urges economic reforms or face brittle growth, high debt and unemployment

Tuesday, October 14th 2014 - 16:43 UTC
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Lagarde has been beating the drum on deeper economic reforms for at least the past two years Lagarde has been beating the drum on deeper economic reforms for at least the past two years

The world's policymakers must take economic reforms more seriously, or they could see their economies stuck in a muddle of mediocre growth with high debt and unemployment, the head of the International Monetary Fund said at the multilateral organization assembly.

IMF Managing Director Christine Lagarde said her advice had not changed much since six months ago, the last time the world's finance ministers and central bankers gathered in Washington for the IMF and World Bank meetings, but more threats loomed on the horizon.

“The latest snapshot of the global economy looks uneasily familiar: a brittle, uneven recovery, with slower-than-expected growth and increasing downside risks,” Lagarde said in her “Global Policy Agenda” that lays out priorities for the IMF and its 188 member countries.

In its global economic outlook earlier this week, the IMF cut growth projections for the third time this year, to 3.3% in 2014 and 3.8% in 2015, warning of weaker performance in core Euro zone countries, Japan and big emerging markets like Brazil.

“A much higher premium needs to be put across the membership on policies aimed at decisively raising today's actual and tomorrow's potential growth,” Lagarde said.

The IMF has warned the Euro zone in particular risks sinking into a morass of low growth as it grapples with high unemployment and low inflation.

Lagarde said she welcomed recent plans by European Central Bank President Mario Draghi to buy bundled debt in order to boost Europe's flagging economy, but said he should be willing to do more if prices did not start rising.

“But if the inflation outlook does not improve and expectations continue to drift downward, the ECB should be willing to do more, including purchases of sovereign assets,” she said.

Lagarde has been beating the drum on deeper economic reforms for at least the past two years although efforts to secure tangible action in the Euro zone have been stymied by Germany's reluctance to embrace stimulus.

Lagarde said Germany and the United States in particular have space to invest more in growth-enhancing infrastructure projects.

She also said the IMF may soon start figuring out what to do about long-delayed reforms to its governance structure meant to give emerging markets a greater voice.

The US Congress has so far failed to pass the measures, which were agreed in 2010 but cannot proceed without the support of the world's biggest economy. Prospects for ratification seem unlikely in the short legislative session before the end of the year, after the United States holds mid-term elections in November.

“Staff will build on existing work and develop options for next steps should ratification of the 2010 reforms be delayed beyond year end,” Lagarde said.


Categories: Economy, Politics, International.

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  • bushpilot

    What specifically are the reforms the IMF is encouraging?

    I'm not too clear, but it seems they are related to government spending more money because they are not spending (throwing away) enough money.

    I think that lots of borrowed government cash changing hands, but very little being actually realized for the transaction, is what is curtailing global economic growth.

    Does this make sense:
    “We need better economic growth. More government spending won't work so that is what we are calling for.”

    How is the U.S. in a good position to implement more infrastructure projects when it is “20 thousand billion” dollars in debt?

    “Borrow more money, that can't be good for you, so that would be good”. Does that make any sense?

    What reforms specifically is La Garde calling for?

    Oct 14th, 2014 - 05:22 pm 0
  • golfcronie

    Is she Dutch, because it is double dutch to me.

    Oct 14th, 2014 - 07:14 pm 0
  • Nostrum of NostrolL

    Well, watching the German news today on ZDF it seems that not only the statistics but now the real economy in Germany are slowing down in a hurry. Car makers are starting to cut shifts all over.

    Meanwhile, the UK miracle has been proven to be yet another “easy money” bubble, people are simply chasing money and real estate prices and that is the entirety of UK growth, in other worlds the fake growth of higher velocity treadmilling, but staying in the exact same spot.

    Meanwhile Scandinavia slows, France deepens its recession, Spain can't really get going and Italy remains perennially at 0% growth.

    Its all looking swimmingly in EUialand.... hahahaha.

    Oct 15th, 2014 - 03:02 am 0
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