IMF Urges Fiscal Solidarity to Solve Euro Crisis, Avert Global Spill Over
International Monetary Fund (IMF) managing director Christine Lagarde admitted on Thursday that global economies could soon slide into brink of collapse if the restive situation in Europe is not resolved at the soonest possible time.
Speaking in Washington on invitation by U.S. Secretary of State Hillary Clinton, Lagarde called for fiscal solidarity among nations as she stressed that "there is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding."
If the Euro crisis gets any deeper, the best picture that the world could imagine is the Great Depression that shattered much of the global economies during the 1930s, Lagarde said.
"This is exactly the description of what happened in the '30s and what followed is not something we are looking forward to," Lagarde warned in a speech before the State Department led by Secretary Clinton.
"The risk from an economic point of view is that of retraction, rising protectionism and isolation," the IMF chief added.
She called attention on the on-goings in Europe as the root of the problem, which in turn pushes the general economic environment into gloomy perspective that is dominated by "pervasive downside risk, downward revisions, slower growth than expected, higher deficits than predicted and public finances in shaky condition."
Lagarde asserted that everyone should make no mistake about the true state of global economies, which all but teeters on threats of recession save for the Asia-Pacific region.
This part of the world - led by China, India and Australia - must take the lead in ensuring that a looming crash will be averted, and these countries need to act decisively.
For now, European leaders must be given enough space to work their way around the crisis that batters their economies though Lagarde admitted that breathing room will not always be extended to country's barely surviving the onslaught of financial crunches.
The financial markets have always been impatient, Lagarde added, even in the case of the Euro zone, a union she described as "not been properly been completed by an economic and fiscal union, which is currently in the works."
All these concerns, Lagarde hopes, would be properly addressed by "organizing a collective financial responsibility, a fiscal solidarity and that element of risk-sharing that is expected, pretty much, around the globe."
The IMF, she asserted, is more than willing to take forefront role on such undertaking.