International Monetary Fund Managing Director Christine Lagarde amped up calls for stronger action by worlds economies to boost growth, warning that downside risks were increasing without decisive action. In a speech at Goethe University of Frankfurt on 5 April, Lagarde prescribed specific measures, including the United States raising its minimum wage, Europe to improve its job training, and emerging economies to cut fuel subsidies and boost social spending. She said recovery from the 2007-2009 global financial crisis remains too slow, too fragile, and risks to its durability are increasing.
Let me be clear: Im not raising the alarm, Im saying that we are on alert. There has been a loss of growth momentum, Lagarde said. However, if policymakers can confront the challenges and act together, the positive effects on global confidence, and the global economy, will be substantial.
Her remarks come less than two weeks before senior ministers, central bankers and policymakers, from the funds 188 member countries, gather in Washington for the IMF and World Bank Spring Meetings to assess the health of the world economy. While US recovery has gained momentum, and emerging markets such as Mexico have performed well, the IMF has warned that growth in Europe and Japan has been a major disappointment. Chinas slowing growth has also hurt oil and commodity exporting countries, including Brazil and Russia.
To counteract the headwind, Lagarde called for accelerating structural economic reform, increased fiscal support and continued accommodative monetary policy. For the first time, she prescribed some specific policy actions in these areas. A higher minimum wage, expanded tax credits for the working poor and improved family leave benefits, changes championed by President Barack Obama and Democratic Party presidential candidates, could help increase the US labour force, she said.