I.M.F. Warns Against ‘3-Speed’ Recovery

This week, the I.M.F. released new economic forecasts lowering its estimates for global growth, while also citing dimished risks of a severe financial disruption in Europe or sharp fiscal policy adjustment in the United States.

Ms. Lagarde warned again of a ‘’three-speed’’ recovery, with developing nations growing apace, stronger advanced industrial economies like the United States healing and Europe continuing to suffer from insufficient demand and incomplete government policies.

‘’It’s not the healthiest recovery,’’ Ms. Lagarde said, but added, ‘’We’ve avoided the worst.’’

The news conference came shortly after news broke that a French court had ordered Ms. Lagarde to appear at a hearing regarding an inquiry during her time as finance minister in Paris.

Asked about the affair at the news conference, Ms. Lagarde said that she had known for years of the possibility that she would be interviewed by the investigative commission. ‘’There is nothing new under the sun,’’ Ms. Lagarde said, dismissing any concerns about the investigation.

Ms. Lagarde gave her blessing to recent actions taken by the Bank of Japan to help bolster growth. She also said the European Central Bank had more room to aid a recovery in Europe, where many countries are still undergoing economic contraction, unemployment continues to rise and the credit markets remain broken.

‘’Of all the major central banks in the world, the E.C.B. is the only one who clearly still has room to maneuver,’’ Ms. Lagarde said.

Asked if Spain needed more time for fiscal adjustment, Ms. Lagarde replied that it did. She said the country needed to put a budget-tightening plan in motion, but it need not be ‘’upfront, heavy duty’’ fiscal consolidation. “Spain needs more time and needs to be able to adjust,” Ms. Lagarde said.

At a separate news conference, Jim Yong Kim, the head of the World Bank, which focuses on economic development, laid out his grand vision for a ‘’two-pronged approach for a world free of poverty.’’

Dr. Kim has called for eradicating extreme poverty by 2030 and for fostering income growth for the bottom 40 percent in every country. ‘’For that second goal, we also mean sharing prosperity across generations, and that calls for bold action on climate change,’’ Dr. Kim said.

‘’Doing better on growth means doing even more of the kinds of reforms that have underpinned the strong developing-country growth of the past 15 years,’’ he said. ‘’That means eliminating bottlenecks; additional investment in infrastructure; and, to ensure that the poor participate in the benefits of growth, much greater investments in education and health care. As we move ahead, we also must address climate change with a plan that matches the scope of the problem.’’

Article source: http://www.nytimes.com/2013/04/19/business/economy/imf-warns-against-three-speed-recovery.html?partner=rss&emc=rss