IMF: Global economy needs collective action now


Chancellor George Osborne: ''They have got weeks not months to sort it out''

IMF chief Christine Lagarde has called for countries to "act now and act together" to keep on the path to economic recovery.

"We are by no means strangers, and we are linked by a common destiny," she said at the annual meeting of the IMF and the World Bank in Washington.

"And these turbulent times must bind us ever closer together."

Ms Lagarde was speaking after another week of volatility on the world's share markets.

In Europe, the main share indexes in London, Paris and Frankfurt all fell about 4% over the week.

Meanwhile, UK Chancellor George Osborne warned time was running out to tackle the eurozone debt crisis.

Speaking in Washington, where the G20 is also gathering, Mr Osborne said European leaders had six weeks to end the crisis.

'Dark clouds'

Ms Lagarde said: "There is a path to recovery. It's narrower than it was three years ago but there is a path and we have options."

Start Quote

John Frary

That money had just gone in two or three weeks due to a very sharp downturn in a very short period of time”

End Quote John Frary from Bedfordshire has seen his retirement fund fall by £7,000 in value in four weeks

But she added: "There are dark clouds over Europe and there is huge uncertainty in the US. And with that we could risk a collapse in global demand.

"Well, so what? Let's remove the clouds and remove the uncertainty. Easier said than done, and it requires clearly a collective action.

"We are all in it together and nobody should be under any illusion that there could be a de-coupling."

Global shares had slumped on Thursday, sparked by a Federal Reserve warning late the previous day about the outlook for the US economy.

And on Friday, Greece denied media reports it was contemplating defaulting on its debts, with creditors taking a 50% hit on Greek government bonds.

Finance Minister Evangelos Venizelos said Athens was focusing on reducing its debt levels.

"All other discussions, rumours, comments and scenarios which are diverting our attention from this central target and Greece's political obligation... do not help our common European task," he said.

Also on Friday, credit rating agency Moody's downgraded eight Greek banks due to concerns about Greece's ability to pay back its debts.

Two of the Greek banks downgraded, the Emporiki Bank of Greece and General Bank of Greece, are majority-owned by France's Credit Agricole and Societe Generale respectively.


Thursday's market falls had sparked the G20 to announce a commitment "to take all necessary actions to preserve the stability of banking systems and financial markets as required".

Which way now for Greece?

A maze

Make your way through the maze of Greece's debt decisions

It said it would follow up this pledge with a "bold action plan" at the beginning of November.

Analysts said investors were unimpressed by the announcement.

"The statement from the G20 last night may have taken the edge off the current bitter market sentiment, but the reassurances from the finance ministers lack substance," said Jane Foley at Rabobank.

"Until politicians back their actions with words in respect to moving closer to a solution to the eurozone debt crisis, markets will continue to worry about a messy and painful outcome from the eurozone debt crisis."

The G20 has given little hint of what action it may take, but markets have long been calling for a substantial increase in the eurozone's communal bailout fund, the European Financial Stability Facility (EFSF), from its agreed level of 440bn euros ($596bn; £385bn).

Many investors also want the eurozone to issue bonds guaranteed by every one of the 17-member nations - so-called eurobonds. However, a number of policymakers, particularly those in Germany, have resisted the idea.

In July, European finance ministers proposed making the EFSF more flexible, allowing it to buy individual government bonds - which would bring down the cost of borrowing for heavily indebted nations - and to offer emergency credit lines to banks. However, the proposals have not yet been ratified.

Sense of urgency

Analysts say far swifter action is needed in order to soothe investors' jittery nerves.

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There still seems to be a large gap between what economists and markets say is needed - and politicians are able to provide. ”

End Quote

"Markets work on a second-by-second basis, while politicians seem to be working to a monthly calendar," Jeremy Stretch from CIBC told the BBC.

UK Chancellor George Osborne also said that time was of the essence.

"There is a far greater sense of urgency than there was three weeks ago about the necessity for the eurozone to address its problems and there is pressure on the eurozone from across the international community," he told the BBC.

He said there was a recognition that a solution needed to be found in weeks not months, and a comprehensive solution needed to come from the G20 leaders' meeting in November.

The BBC's economics editor, Stephanie Flanders, said the chancellor was echoing comments from people outside the eurozone, who think the Europeans missed an important opportunity to resolve the situation over the summer.

They had the summit in July then the perception was that they all went on holiday, leaving question marks over the markets which has now cost them dearly, she said.

The Labour leader, Ed Miliband, has called for the November G20 meeting to be brought forward so that leaders can agree a plan for growth.

Jim O'Neill, chairman of Goldman Sachs Asset Management, suggested this weekend's meeting in Washington could mark the beginning of concerted action to tackle the debt crisis in Europe which is the cause of so much stock market volatility.

"The thing that really brought the world to a better place in 2008 was genuine collective action involving both the developed and the developing world through the G20," he told the BBC.

"The fact that they're all there together in [Washington] DC this weekend should lay the framework for thoughts about quite significant actions... sometime between now or possibly at the November G20 in France."


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  • rate this

    Comment number 135.

    It is the Governments spending our money not us."

    But the government is "us": it is our agent and acts on our behalf. You may or may not agree with some of what it does in our name, but that's beside the point.

  • rate this

    Comment number 134.

    125. coram-populo-2010

    Danny Alexander/George Osborne must increase personal tax allowance to £10K (at least) for those on PAYE minimum wage to enable them to keep working, meeting bills, save and spend.


    They are planning to do just that (and more) over the course of this government.

  • rate this

    Comment number 133.

    Life is hard for the majority, in every Nation.

    What is over-looked, by every nationality, wherever they live, is that they have more friends than enemies - next door. It is only bad Leaders/bad Government/bad Religious propaganda that divide good, decent people in order to rule over us.

  • rate this

    Comment number 132.

    The biggest threat to the World Ecomony (and what has been since 2008) is the constant drip - drip of negative reporting of ecomonic data and news.

    Theis CONTANT news of negativity is ruining the economies around the world and undermining any confidence we have.

    Just this week Madam Legrade has, by speaking out, done untold damage.

    I don'f want lies. I've simply heard enough.

  • rate this

    Comment number 131.

    120 Ron.

    There's 3000+ companies that trade on the nyse. Companies don't float unless they have something worth floating - hence small businessmen can be discounted from your arguement. If each of the 3000 has 10 directors, each earning a disproportionately large salary, remember some benefits are $10'sM, not $1M good times or bad. If jobs created more than a few people will eventually spend.

  • rate this

    Comment number 130.

    The Euro is dead - accept it and come up with a solution

  • rate this

    Comment number 129.

    I wonder how much Christine Lagarde gets paid to stand up and say that collective action is required. I have some advice. Do not bail out the banks, let the stock market crash. everyone knows that companies are not worth the figures from the stock exchange. that is just profiteering by investors. It is not the real world.

  • rate this

    Comment number 128.

    Ref. 77. SkillTim
    One simple rule: Don't spend money you don't have!

    It is the Governments spending our money not us.

  • rate this

    Comment number 127.

    We had two world wars in the last century. Now we are in the EU this dept crisis is not a crisis, its the price of peace. We wont get it right all the time but its better than 1939 or 1914. So our leaders should put this so called crisis in context and deal with it. Otherwise they can have a gun each and go into a trench themselves because none of my children are.

  • rate this

    Comment number 126.

    So many fine words. yet everyone is getting in more and more debt. How do all these fine people propose we get out of debt? They say borrow more. utter madness.

  • rate this

    Comment number 125.

    Those in average jobs keep the world turning; no stocks/shares or buy to let properties in different names/off the shelf companies to avoid tax, are still being left behind?

    Danny Alexander/George Osborne must increase personal tax allowance to £10K (at least) for those on PAYE minimum wage to enable them to keep working, meeting bills, save and spend.

    Those on PAYE are easy targets - stop it!

  • rate this

    Comment number 124.

    The question now is - can my company pension fund sue the finance company for bad management?

    The ones that sold me the deal, never saying it would fail, except the small print - convinced by the salesman this will not happen.

    A bit like the mis sold PPP, that cost the banks £10's millions.

    I can see it now "Have you been mis-sold your pension" contact us on 0845****** to see if you can claim.

  • rate this

    Comment number 123.

    Each country has its own particular problems and each country should address them. There is no magic pill. The potential for budgetary savings in the UK is massive. It is time our elected politicians started listening to UK public opinion and not bigging it up on the world stage.

  • rate this

    Comment number 122.

    118 Reclaim_the_country
    Let the Banks collapse.

    Banks do not hold investors money or business money, the hold my salary, the hold my neighbours benefits. Should one bank collapse that will personally touch the lives of millions of people, should five banks collapsed that would have rendered everyone in the UK penniless. You cannot allow them to collapses even if you wanted to.

  • rate this

    Comment number 121.

    Advise from Cameron and Osborne surely a joke.

  • rate this

    Comment number 120.

    117 Yankee_Poodle
    How many people could return to work?
    None, since there is no job for them to do!! Every job in industry must pay for itself. Besides the majority of companies are small to medium size companies where the MD only gets about £30,000 and have re-mortgaged their home to set up the business

  • rate this

    Comment number 119.

    80. Jason Mead. "As my investments have lost a lot of money in recent weeks due to the indecision of European leaders, can I sue them for my loss?"

    You have lost nothing. It’s an unrealised loss unless of course you choose to sell and make it worse which is all your decision.

  • rate this

    Comment number 118.

    Perhaps the (UK) Government should have done the same as the Icelandic Government did.

    Let the Banks collapse.

    Use the money that was used to rescue the Banks to rescue the businesses that would have been harmed by the Banks collapse.

    Also to reimburse the Private investors.

    Let the Bankers and their employed gamblers loose out.

  • rate this

    Comment number 117.

    Perhaps there can be collective action to prevent the directors of publically listed corporations taking home salaries and benefits that are disproportionate to the rest of society. Even a modest $1M salary will pay 20 people $50K. Imagine if the board of directors of 1000's of companies were to take a 50% pay cut... How many people could return to work?

  • rate this

    Comment number 116.

    For all his faults and self-admitted mistakes, Gordon Brown exersized the international leadership we need now.

    Cameron doesn't have the courage or international respect we require. Cameron and co need to listen to Darling and heed his warnings over austerity measures and confidence.

    This is what we lost


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