- The Washington Times - Thursday, April 12, 2012

The International Monetary Fund chief called for a “rebalancing” of the global economy that will involve a worldwide safety net similar to the reserve fund that European institutions have created to bail out debt-ridden members.

In a speech at the Brookings Institution on Thursday, Managing Director Christine Lagarde praised the building of the $1.1 trillion “financial firewall” being held by the European Financial Stability Facility and the European Stability Mechanism but said a “broader approach” beyond the borders of the eurozone is needed.

“In today’s global economy, with its dazzling array of instant interconnections, a stronger European firewall can only ever be part of the solution,” Ms. Lagarde said. “A stronger global firewall will help complete the ‘circle of protection’ for every country.”

She added that the IMF can help, but it needs more funding. The European firewall, set to amount to about $1.1 trillion, was approved late last month in a meeting with the 17 countries that use the euro currency.

Ms. Lagarde said the IMF has a plan to “keep the crisis at bay” and plans to hold “Spring Meetings” with partnering countries in the coming months to swell its resources to help all its members.

“The fund needs to be able to stand behind all its members and meet the needs of all those affected by the crisis - those at the epicenter, and those who are bystanders,” she said.

Her speech came on the same day that the World Trade Organization reported that global exports are expected to grow by only 3.7 percent in 2012 in large part because of the Japan earthquake and Arab Spring. Likewise, the organization forecasts that world trade will not do much better next year, increasing just 5.6 percent. In contrast, world trade jumped 13.8 percent in 2010.

“The further slowing of trade expected in 2012 shows that the downside risks remain high. We are not yet out of the woods,” World Trade Organization chief Pascal Lamy cautioned on the group’s website.

Ms. Lagarde agreed, saying in her speech that while the global economic crisis is not yet over, this is a “breathing moment” and the U.S. may have reached a turning point based on data from economic indicators that show an uptick in growth.

“More recently, some data has indicated that the United States may be beginning to turn the corner,” she said. “Financial strains in Europe have eased somewhat since December. However, events of the past week remind us that markets remain volatile and that ‘turning [the] corner’ is never easy.”



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