11 Oct 2012

IMF head calls for urgent economic action

8:57 pm on 11 October 2012

The head of the International Monetary Fund says the world's economic recovery is at risk because governments are not still acting fast enough to push through financial and economic reform.

Speaking at the IMF annual meeting in Tokyo on Thursday, Christine Lagarde said Europe's economic crisis and divisions over how to deal with it pose the greatest threat, the BBC reports.

Ms Lagarde's message to world leaders was stark: the world's economic recovery is being put in jeopardy by politics. It is time, she said, for governments to act on financial reform - and to do so fast.

In particular, she pointed to the eurozone, still the epicentre of the world economic crisis.

However, she also highlighted the United States where deadlock between the White House and Congress has left the world's largest economy without a plan on how to deal with America's huge public debt.

Ms Lagarde said all of this is making investors nervous and holding back economic recovery.

Later in the day, finance ministers and central bankers from the Group of Seven richest nations will hold informal gatherings where they will likely discuss steps to address Europe's debt crisis, weaker growth in Asia and the budget impasse in the US, AFP reports.

The IMF has scaled back its global growth forecast to 3.3% for 2012 from an earlier projection of 3.5% and has warned that even its dimmer outlook might prove too optimistic if Europe and the US fail to resolve their crises.

The World Bank has cut its forecast for major Asian economies, including China and India, citing global risks.

Call for China and Japan to resolve issues

The IMF meeting in Tokyo is taking place at a time of increased political tensions between Asia's two biggest economies, China and Japan.

Relations between the nations have deteriorated in recent weeks after Japan said it had purchased a set of disputed islands in the East China Sea, which are claimed by both the countries as well as Taiwan, the BBC reports.

On Wednesday, the governor of China's central bank pulled out of IMF and World Bank meetings. The country's finance minister is also unlikely to go, as state media said that Vice-Minister Zhu Guangyao would attend.

IMF head Christine Lagarde on Thursday called on China and Japan to resolve their differences.