International Monetary Fund managing director Christine Lagarde has called for strong and decisive growth plans from policymakers in Europe and the United States, warning that global economic recovery is slower and weaker than anticipated.
Speaking at the Peterson Institute for International Economics, Lagardedescribed the recent policy initiatives by major central banks - the European Central Bank's bond purchasing programme as well as QE3 by the Fed - as "big policy signals in the right direction" but also warned that the global economy is still fraught with risks and policy uncertainty weighing growth down.
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The ongoing crisis in Europe, US fiscal problems and an imminent slowdown in Asia are threatening even deeper problems, Lagarde said, and have triggered fresh concerns about waning momentum for recovery following the 2008 financial crisis.
Calling Europe the "epicentre of the crisis", she said structural reforms and fiscal adjustments were unavoidable in crisis-hit euro zone countries and also reiterated IMF calls for Europe to move towards a banking union, which she said could help prevent nations from being dragged down by sickly banks.
In the US, implementing fiscal cuts that would be part of a current law if no agreement is reached on how to reduce the country's debt would reduce growth by as much as 2 percent, she said.
Emerging markets are now also feeling a slowdown, which for some may call for additional stimulus measures or a halt to fiscal and monetary tightening, Lagarde said, adding that the Fund is willing to offer precautionary financial support.
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This time, we need a sustained rebound, not a bounce. If this time is to be different, we need certainty, not uncertainty. We need decision makers to be real action takers. We need delivery.
Lagarde said the IMF would likely lower its global economic growth estimates when they are published on October 9 at an annual meeting with the World Bank in Tokyo.
"We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July," she said. "Our forecast has trended downward over the last 12 months."
The Fund had been expecting the global economy to grow by 3.5 percent this year and by 3.9 percent in 2013.
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