International Monetary Fund managing director, Christine Lagarde, has warned that the global economy “could easily slide into a ‘1930s moment’ unless global leaders take the actions that they know must be done. Lagarde’s speech in Berlin outlined what she thinks must be achieved in three areas: the Eurozone; the rest of the world; and the IMF’s role.
In Europe, “[t]here are three imperatives—stronger growth, largerfirewalls, and deeper integration.” For the US, which has a special role in the global economy, “The key policy priorities must be to relieve the burden of household debt and to deal decisively with the issue of public debt.” China “can help itself and the global economy by continuing to shift growth away from exports and investment, toward consumption.” The IMF should continue to push for more integration, and build up a loan fund of $500 billion to help meet what Lagarde sees as the need for $1 trillion in potential global financing needs.
None of this analysis is particularly new, but the forcefulness and details included in Lagarde’s speech are unusual. The entire speech is available here.