Lagarde calls for collective leadership to ensure recovery

 

“THERE IS a path for recovery,” Christine Lagarde said in her first press conference as managing director of the IMF yesterday.

However, she warned, this path was narrower than it was three years ago when we were first hit by the financial crisis. She appealed repeatedly for “collective” and “synchronised” leadership.

Governments had less room to manoeuvre now than in 2008. There was less “ammunition” for economic stimulus. But most of all, she said, “I think what is lacking today, and I hope will be rejuvenated, is the collective momentum and the spirit that I saw, for instance at the London G20 meeting [in 2009]. That was a moment when all leaders came together. I hope that can happen again.”

Deficits must be reduced in the medium and long term, Ms Lagarde said, but added that some countries, in particular the US, needed growth in the short term.

The IMF director repeatedly praised the results of the July 21st Eurogroup summit on Greece, but flagged the need to implement its conclusions. “There was indeed financial commitment,” she said.

“There was a political collective determination to be in it together. There was an open-ended financial support, provided that countries were delivering under their commitment, for those countries that are under programme.”

Yet Greece needs another €8 billion bailout for the government to function beyond mid-October.

“We must collectively insist on implementation [of the July 21st commitments],” Ms Lagarde said.

“It will be critical in the case of Greece, in particular, that there is implementation by the Greek authorities, and implementation by the euro-area partners.”

The Greek debt crisis was not purely economic, she said. “It is also about a political, collective destiny amongst countries that have spent centuries fighting with each other, and which are determined to stay together,” she said.

There was “a gap between the day-to-day anxiety and trepidation of the markets” and some good results coming from the euro zone, Ms Lagarde said. Several European countries had taken “bold measures” to reduce deficits. Even Greece had reduced its deficit spending by 7 per cent over the past 18 months.