Washington: International Monetary Fund chief Christine Lagarde warned Thursday that more efforts were needed to get the global economy back on track.
“We stopped the collapse, we should avoid the relapse, and it’s not time to relax,” Lagarde said at a news conference at the multilateral institution’s Washington headquarters.
“There’s still a lot of work to be done.”
The IMF managing director, while pointing to signs of economic improvement, noted deterioration on the jobs front, which she called “critical from an economic point of view but also from a social point of view.”
“We need growth for jobs and jobs for growth,” she said.
The eurozone, the center of the public debt crisis dragging down global growth, and where the IMF together with the European Union has rescued Greece, Ireland and Portugal, has to do more to address its challenges, she said.
Financial firewalls erected by the European Union and the European Central Bank, such as the European Stability Mechanism rescue fund and ECB bond purchases, “have not proven operational.”
“Progress needs to be made on the banking union,” she added.
Lagarde suggested further monetary easing in Europe may be appropriate to sustain demand.
As for the United States, the IMF chief called on bitterly divided politicians to reach a compromise on the nation’s borrowing limit and deficit-reduction plans.
“All sides should pool together in the national interest” to avoid another “avoidable political mistake”, she said.
With the mandated US borrowing limit already reached, and the Treasury using extraordinary measures to avoid putting the world’s biggest economy into default, Republicans are tying raising the ceiling to spending cuts.
Democratic President Barack Obama has rejected that basis for negotiations.
More than four years after the US financial crisis plunged the global economy into recession, Lagarde also called for completion of financial system reforms.
She expressed concern about the banking sector’s tendency to drag its heels with regulation, especially the international Basel III standards.
“It’s the constant approach by the industry to actually push back because it’s nicer to operate without regulation rather than with regulation.”
“I might be a little blunt but that’s my experience as a former minister of finance (in France) and having observed the profession close by,” she added.
Asked about Japan’s desire to curb appreciation of the yen, Lagarde reiterated her firm opposition to currency wars and other competitive devaluations.
“If only the risks of retaliation should actually prevent anybody to go into that sort of monetary policy,” she said.