The chief of the International monetary fund Christine Lagarde has called for world leaders to take decisive action to end the global slowdown and lower the “terrifying and unacceptable” levels of unemployment.
The IMF director attacked policy makers and politicians in Europe and the US marking them out as the main cause for the uncertainty lingering in the global markets. She made her plea whilst addressing the annual IMF meeting in Tokyo; the speech comes just days after the IMF slashed its global growth forecasts for the next two years. Ironically its announcements like those that add to the sense of fear pervading the global economy.
Ms Lagarde said that the doubts are “deterring investors from investing and creating jobs,” she said. “We need action to lift the veil of uncertainty.” She also backed the IMF’s decision to soften its stance on austerity measures, saying that governments should no longer pursue debt reduction targets but instead focus on reforming their economies. She added;”There are threats on the horizon, threats that can be addressed, should be addressed but are not necessarily addressed. We don’t think it’s sensible to stick to nominal targets. We think it’s much more sensible to apply measures and let the stabilisers operate,” she said.
Perhaps she should have suggested that to the Greeks before they went down that path. The IMF’s new stance is one of toleration rather forcing nations to enforce growth-sapping measures and governments imposing tax hikes and spending cuts.
The German finance minister Wolfgang Schaeuble confirmed the concern of the markets that the global economies big players can’t agree. He dismissed Lagarde’s comments saying; “I am convinced that we will be able to tell our friends and partners around the world that Europe is in the process of solving its problems and Europe is aware of its responsibility.”
The IMF expressed frustration with Europe’s piecemeal response to its debt crisis and warned that a recent respite in borrowing costs for debt-laden countries such as Spain may prove short-lived unless leaders come up with a comprehensive and credible plan to end the crisis.
In its financial stability report on Wednesday, the IMF said that without swift policy action, including the triggering of the European Central Bank’s bond-buying programme, the premium that investors demand to hold Spanish and Italian debt instead of safer German bonds would nearly double.
As if to confirm their concerns Standard & Poor’s cut its rating on Spain on Wednesday to a level just above junk territory, and Moody’s may soon follow its lead.
The Pound to Euro exchange rate is currently trading at 1.2410
The Pound to US Dollar exchange rate is currently trading at 1.6030
The Pound to Australian Dollar exchange rate is currently trading at 1.5584
The Euro to US Dollar exchange rate is currently trading at 1.2912
The Euro to Pound exchange rate is currently trading at 0.8056
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