Lagarde wants ‘real fix’ for Greece as slowdown spreads
Greece needs a lasting solution to its debt burden to avoid a prolonged crisis as Europe’s slowdown and U.S. fiscal problems dampen the economic outlook in Asia, International Monetary Fund Managing Director Christine Lagarde said on Wednesday.
The IMF expects a «real fix» for Greece that puts its debt on a sustainable path as quickly as possible, Lagarde said, showing no signs of backing down in a clash with the EU over a timetable for the country’s recovery plan.
“Obviously from the IMF’s perspective, we expect a real fix, not a quick fix, and that means clearly debt that is sustainable as quickly as possible,» Lagarde told reporters in Malaysia at the start of an Asian tour.
Eurozone finance ministers have suggested Greece, where the eurozone debt crisis began, should be given until 2022 to lower its debt to GDP ratio to 120 percent but Lagarde has insisted the existing target of 2020 should remain, in an unusually public airing of disagreement.
Lagarde said that all Greece’s partners shared the same goal of ensuring the country returned to economic stability and could access financial markets as quickly as possible.
The European crisis and the looming U.S. «fiscal cliff» meant there was «nowhere to hide» in the global economy as a global slowdown spreads to Asia, Lagarde said in a speech following her news conference.
Brisk growth in Asia could not be taken for granted next year, although the IMF expects it to expand 2 percentage points faster than the global average, she said.
“It depends on the actions of global policymakers, especially in the United States and Europe. And ‘action’ is the operative word,» Lagarde said.
The IMF last month cut its forecast for global growth in 2012 to 3.3 percent from 3.5 percent, and to 3.6 percent in 2013 from 3.9 percent previously.
The United States must avoid its so-called fiscal cliff of expiring tax provisions and spending cuts, Lagarde said, adding that the measures risk pushing the world’s largest economy into recession and smothering growth elsewhere.
“This policy uncertainty must be resolved, and it will require all sides coming together,» Lagarde said.
Eurozone leaders must deliver on their policy commitments and forge ahead with fiscal and financial integration as they seek a way out of the region’s festering crisis, she said.
Again, «all players must play their part,» Lagarde said.
She said Europe could learn from Asia’s deleveraging and trade openness as it rebounded from its 1997 financial crisis.
“Asia’s economic foundations became safer, sounder, and more resilient — but still open to the world and open for business. This has important lessons for the advanced economies currently facing severe challenges.”
As with Europe, the best way for Asia to guard against volatility was to push ahead with free trade and closer financial integration, Lagarde said.
Lagarde said that China’s current leadership transition would be positive for Asia’s biggest economy, once it is completed, by relieving businesses and markets of uncertainty.
“The halo of uncertainty that prevailed over the transition is going to be removed,» she said.