INTERNATIONAL MONETARY Fund chief Christine Lagarde has said last month’s increase in the size of the so-called European firewall to €800 billion was “significant” but cautioned that more needed to be done.
“Collective action is needed because all members have to address their respective issues, in the euro zone in particular. It is today the epicentre of potential risks,” she said.
“If we had a message for Europe and the euro zone ... it would be ‘keep up’. ‘Keep up’ means implement the reforms that have taken place nationally, at the regional level, within the currency zone; keep up in deepening the integration of the zone at multiple levels and build on the efforts.”
Among the risks threatening the world economy that Ms Lagarde pointed to were slow, protracted growth, renewed financial stress in the euro area and potential oil price increases.
She also pointed to “high, sustainable unemployment in many corners of the world”.
Speaking at a separate press conference, the outgoing president of the World Bank, Robert Zoellick, said Europe had bought itself some time last year but the future of the euro zone depended on the actions of individual countries in carrying out fiscal integration and structural reforms.
“I think the euro zone in particular and the European Union is going to be walking a very fine line.
“With the anxieties late last year, I think the ECB’s extraordinary actions were appropriate but I think some misled themselves because they only bought time, and the time has to be used,” he said.
“I think further actions are going to be called for, and the point I keep emphasising not just to focus on the austerity and macroeconomic stability measures, but you need to do this in a context of growth.”
Ms Lagarde and Mr Zoellick are in Washington for the annual spring meetings of the IMF and the World Bank Group.
Ms Lagarde said she expected the IMF would come within 16 per cent of its new funding target of $400 billion by the end of this week’s meetings, having so far received pledges from member states totalling $320 billion.
“We expect our fire power to be significantly increased as an outcome of this meeting,” she told reporters at the opening press conference of the meetings.
The beefed-up fund will be used to help deal with problems in the euro area, although Ms Lagarde emphasised that the money would be made available across the fund’s 188 member states.
“We’re not just raising money for the euro zone,” she said.
