December 26, 2011

World Economy 'in a Dangerous Situation:' Lagarde

Critical of summit agreement, IMF head calls for Europeans to 'speak with a single voice'

Christine Lagarde, head of the International Monetary Fund, said Sunday that the world economy was in peril and that Europeans should speak as one on the debt crisis, in the wake of a summit agreement that she found wanting in specifics.

Reuters reported that Lagarde, speaking in an interview in the French publication Journal du Dimanche on Sunday, was not impressed with the agreement reached at a summit meeting by European Union leaders to resolve the debt crisis. The crisis itself she termed "a crisis of confidence in public debt and in the solidity of the financial system," and went on to say, "The Dec. 9 summit wasn't detailed enough on financial terms and too complicated on fundamental principles."

Warning that, "The world economy is in a dangerous situation," Lagarde added, "It would be useful for Europeans to speak with a single voice and announce a simple and detailed timetable. Investors are waiting for it. Grand principles don't impress."

The IMF head pinpointed some of the trouble in reaching a solution as insistence on protectionism by some member countries, which she said made it "difficult to put in place international coalition strategies against it." Without specifying which countries she believed guilty, she continued, "National parliaments grumble at using public money or the guarantee of their state to support other countries. Protectionism is in the debate, and everyone for themselves is winning ground."

Lagarde also predicted difficulties for emerging market nations as the crisis wears on. Speaking about Brazil, China and Russia, she said, "These countries, which were the engines [of growth], will suffer from instability factors."

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