- - Thursday, April 9, 2015

The head of the International Monetary Fund said Thursday that support for the new, China-sponsored development bank is “a no-brainer,” despite the clear reservations of the Obama administration.

Christine Lagarde, IMF managing director, joined World Bank President Jim Yong Kim this week in lending her support to the newly proposed $100 billion Asian Infrastructure Investment Bank (AIIB). Mr. Kim said on Tuesday the World Bank was ready to cooperate with the AIIB as it aims to open its doors by the end of the year.

The struggle over the formation of the bank has become a major embarrassment for the Obama administration, which lobbied key allies unsuccessfully not to join as founding members. The U.S. argued the bank could compete with existing, Western-dominated institutions such as the World Bank while undercutting lending standards on such issues as the environment and corruption.

But Britain, Germany, South Korea, Brazil, Australia and India are among the four dozen countries that have signed on to the Shanghai-based bank, designed to help finance trillions of dollars in infrastructure needs in the booming Asian region.

Ms. Lagarde has already signaled her willingness to work with the new AIIB, and repeated her endorsement in even more forceful tones Thursday ahead of next week’s annual meetings in Washington of the IMF and World Bank.

Whatever support and aid countries give to the AIIB will carry very little risk for the U.S., she told a gathering at the Atlantic Council. All of the risk will be the assumed by the Chinese government, she argued.

SEE ALSO: American boss of World Bank ignores Obama, welcomes new Chinese bank

“I think it is a no-brainer,” Ms. Lagarde said about supporting the AIIB. “What is good for the country is good for the surrounding community. If countries strengthen their banks — domestic banks — it will not only serve them well, but it will help their neighbors.”

The new Chinese-sponsored bank “reflects a new landscape for the global economy,” she added.

Ms. Lagarde also chided the U.S. government for failing to ratify a reform package approved by virtually all other major economies that would adjust voting power at the IMF to reflect the rising clout of emerging economies such as China and India.

Surveying the global economy, Ms. Lagarde said she worried that some of the biggest countries were settling for subpar growth rates that would not meet the needs of rising generations, pay off debts and create enough well-paying jobs.

“Today what we must do is avoid that [the] new mediocre becomes the ‘new reality,’” she said. “All policy space and levers must be utilized.”

She added, “It is not that overall growth is bad — at 3.4 percent last year it is roughly the average for the last three decades. It is rather that, given the lingering impact of the Great Recession on people, including 50 percent youth unemployment in some countries, growth is just not good enough.”

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