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More 'firepower' is needed to confront crisis, says Lagarde

The managing director of the International Monetary Fund (IMF) called on the world's developed nations yesterday to "increase our firepower" to better confront global financial strains like those now in play in Greece and several other eurozone nations.

"We certainly need more resources," Christine Lagarde told the annual meeting of the Associated Press. But she did not specify how much more was needed. She said the IMF would address that question at its spring meeting in two weeks.

Ms Lagarde said the global economy is making some advances in digging itself out of a punishing recession, but that the recovery remains very fragile, especially in Europe.

She suggested cutting government spending too quickly in developed countries like the United States and larger European nations could make things worse, not better.

Policymakers on both sides of the Atlantic need "breathing space to finish the job", she said.

Ms Lagarde also said that Europe's faltering would quickly spread and the US recovery, slowly gaining strength, "might well be in jeopardy". She said that "America has a large stake" in how Europe and the rest of the world fares.

Ms Lagarde said it is important to continue and expand emergency programmes among the 17 countries that use the euro to help heavily-indebted countries there.

"We should not delude ourselves into a false sense of security," she said. "The recovery is still very fragile. The financial system in Europe is still under heavy strain. Debt is still too high, public and private. Stubbornly high unemployment is straining the seams of society."

Ms Lagarde's remarks came after the eurozone countries last Friday boosted their emergency bailout funds for heavily indebted countries by €800bn. That was short of the €1trn that Ms Lagarde and other international leaders have said is needed to calm financial markets.

On Tuesday, she said, now that the Europeans have moved first to raise their firewall, "the time has come to increase our firepower".

Ms Lagarde also suggested that bold steps are needed such as those taken by the US Federal Reserve and the European Central Bank to help "keep growth strong and steady".

She said most countries are running deficits that are too high and "need to bring down debt over time.

"But a global undifferentiated rush to austerity will prove self-defeating."

Ms Lagarde noted that over 200 million people globally are without work, declaring that "jobs must be a priority".

Irish Independent