The threat of financial collapse in the global economy shows signs of weakening, said this week Christine Lagarde, Managing Director of the International Monetary Fund (IMF). However, she warned that economies still need to go through financial reforms to reduce debt. “We stopped the collapse, we should avoid the relapse, and it’s not time to relax,” she said on January 17 in a press conference on the outlook for 2013.
Lagarde said the world’s economic powers, including the United States and European countries have taken important steps to support and strengthen their financial systems, but still have much work. She warned that there are signs of weakening commitments for the financial sector regulation, despite severe problems that started with the 2008 collapse of U.S. financial institutions. Lagarde said that reforms are delayed, diluted, and she is worried that banks oppose necessary reforms.
In the United States, where President Barack Obama is blocked by the Republicans’ talks about how to lower the country deficit, Lagarde said that any cut must be applied at the appropriate time for economic recovery to take place. In Europe, she says she sees a lot of progress in reforms. Lagarde noted that the European Union has a number of new tools to act in case of a financial crisis. “And yet protective walls are not operational yet,” she said. Lagarde added that the EU still has work to do on banking union to prevent future problems.
Regarding Greece, which has experienced the most acute collapse of all EU countries and which many believe should leave the monetary union, Lagarde said that recent reforms seem to restore confidence. “There’s still a lot of work to be done,” the IMF chief said, adding that “we need growth for jobs and jobs for growth.”
“This time it’s different,” she said, paraphrasing the title of the famous book written by the economists Carmen Reinhart and Ken Rogoff.
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