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IMF’s Christine Lagarde: World Economy “Not Out of the Danger Zone”

By: Caribbean Journal Staff - February 26, 2012

Above: IMF Managing Director Christine Lagarde (IMF Photo/Dirk Enters)

By the Caribbean Journal staff

The world economy is “still not out of the danger zone,” International Monetary Fund Managing Director Christine Lagarde said following the conclusion of the G20 Finance Ministers and Central Bank Governors meeting in Mexico City Sunday.

“The G20 countries must now strengthen resilience to further shocks that could result from the still-fragile financial systems, high public and private debt, and higher world prices,” she said. “Of equal concern is unemployment, which is still too high in many countries.”

Lagarde said the talks focused on the challenges facing the world economy, and that high-frequency indicators now suggest an uptick in activity, mostly in the United States.

“Against this backdrop, we also discussed building stronger global firewalls, including enhancing the Fund’s resources to guard against renewed shocks and to restore global confidence,” said Lagarde, who replaced former IMF head Dominique Strauss-Kahn in July. “We have suggested an increase in IMF lending capacity of $500 billion, which would be combined with an equally credible, high-quality and properly-sized firewall at the European level.”

Lagarde also said there was progress at the technical level, with a broad agreement that an increase in IMF resources could be done through “bilateral borrowing and note purchase agreements.”

“We have used this model before, and we know it can work quickly,” she said.

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