The International Monetary Fund’s managing director Christine Lagarde has called for decisive action to tackle the eurozone’s “terrifying and unacceptable” levels of unemployment.
Speaking in Tokyo at the IMF and World Bank’s annual meeting, Lagarde implored that the global economy needs urgent action to “lift the veil of uncertainty” that has shrouded the global economy.
“Whether you turn to Europe, to the United States of America, there is a level of uncertainty that is hampering decision-makers from investing, from creation jobs”, she said.
Lagarde also reasserted that insecurity in the eurozone and the US is “having a ripple effect on emerging markets, and in particular Asia”.
The warning comes just days after the IMF slashed its 2012 growth forecast down from 3.5 per cent to 3.3 per cent, the slowest since the 2009 recession.
“The recovery continues, but it continues more slowly than we had expected earlier this year”, said Lagarde.
Predictably, Lagarde placed emphasis on the eurozone, saying that it remained “the epicentre” of the global economic slowdown.
The eurozone unveiled its much-awaited €500bn European Stability Mechanism rescue fund on Monday, whilst European governments have taken significant steps to cut budget deficits. However, plans to introduce a European banking supervision system have hit a speed-bump as Germany wants more time to finalise the details.
“Action has already occurred”, Lagarde said. “But more needs to happen faster”.
Lagarde also extended her appeal to the US, warning that the economy faced severe “fiscal risks”, in reference to the tax increases and spending cuts scheduled for early next year. The “fiscal cliff”, as it’s called, would pose a profound threat to the world’s largest economy unless Congress takes significant steps to overcome a budget impasse.
Lagarde expressed her disappointment in China’s absence at the summit, with flaring Sino-Japanese tensions over the disputed Senkaku/Diaoyu islands prompting China to boycott the meetings.
“They lose out by not attending”, she said. “We hope that differences … can be resolved harmoniously and expeditiously so that, from an economic point of view, cooperation can continue”.
The annual meetings are scheduled to draw to a close on Sunday.