IMF chief warns of economic 'relapse'
International Monetary Fund managing director Christine Lagarde has warned against governments sitting back and relaxing following economic reforms already introduced.
Ms Lagarde said that further progress was required to ensure that economies continued on the road to economic recovery. “We stopped the collapse, we should avoid the relapse and it is not time to relax,” she told reporters at the IMF’s head office in Washington.
New policies had been introduced in the euro zone creating “new tools in the toolbox” to fight crises, “yet firewalls have not yet proven operational”.
She warned that further progress was required to create a banking union in the euro zone, a prerequisite to any direct cash injections from the euro zone’s bailout funds into struggling banks. Further monetary easing would also be appropriate to sustain demand, she added.
Ms Lagarde did not refer to Ireland or the EU-IMF bailout programme during the hour-long press conference.
However, she said significant reforms on reducing fiscal deficits and on the banking union had been made but she was “impatient” on how the banking union and single euro zone banking supervisor would work.
“I don’t think that we can any more accuse the Europeans of kicking the can down the road because they are producing results and they are exploring significant reforms,” she said.
Despite this, Europe must still avoid a relapse and not relax, she said.
Ms Lagarde said that US lawmakers should move quickly to avoid another showdown in the coming weeks over the lifting of the debt ceiling beyond $16.4 trillion (€12.3 trillion).