Recovery at last?
IMF chief Christine Lagarde said on Sunday (March 18) that measures taken to fight financial woes in Europe and the United States were beginning to pay off.
Friday 23 March 2012, 09:36AM
Ms Lagarde was in Beijing for a two-day trip to attend a forum on China’s development and hold meetings with her economic counterparts, such as Vice Premier Wang Qishan, before she travels to India.
In a cautiously upbeat assessment of the global economy, she said, “Even just a few months ago, the situation was decidedly gloomy. Indicators for the last quarter of 2011 – namely for Europe and the United States – did not
provide much reassurance.
“Yet, today, we are seeing signs of stabilisation; signs that policy actions are paying off.
“Financial market conditions are more comfortable and recent economic indicators are beginning to look a
little more upbeat, including in the United States.”
Europe – China’s top export market – has been hit by a severe debt crisis that has seen a wave of credit-rating downgrades and brought Greece to the brink of bankruptcy, sparking concern across the world.
But Lagarde said some of the policy actions taken – particularly by the European Central Bank and some European countries – had helped stabilise the overall situation.
Most EU nations agreed in January to a treaty that will require governments to introduce laws on balanced budgets and impose near-automatic sanctions on countries that violate deficit rules.
And the looming threat of a Greek default has receded after a large majority of the country’s private creditors agreed to a bond swap that will see them accept huge losses and wipe some 100 billion euros (B4 trillion) off Athens’ debt.
In the United States, meanwhile, the economy is showing signs of improvement with better consumer and business spending and an improved job market, though there is still high unemployment and a depressed housing sector.
But Lagarde warned there were still major vulnerabilities, with public and private debt still high in many advanced economies, oil prices rising, and the risk of slowing activity in emerging nations.
She also praised China for its “leadership and adept policy skills” in the global financial crisis, but said it should continue to move away from its dependence on exports and investment, and focus more on domestic consumption.