The world economy has gone through the worst stages of the
crisis and is now recovering at an uneven pace, with some
countries growing strongly, others being on the mend and others
still mired in recession, Lagarde said during a news conference
at the opening of the International Monetary Fund's spring
"The three-speed recovery is not the healthiest we can think
of. What we need is a full-speed global economy," Lagarde
She said that while monetary easing was important for the
eurozone to be able to get out of recession, the smooth
transmission of monetary policy to ensure that lower interest
rates are translated into lower borrowing rates for small and
medium size companies was even more important.
"Of all the major central banks in the world, the ECB is the
only one who clearly still has room for maneuver. It is up to
them to decide ... when to lower interest rates," Lagarde
"There has to be enough strengthening as well as
restructuring, if need be, of the banks within the eurozone in
particular, as well as the right influx from the top at the
right moment, and that should finally unleash the credit that
is needed to rebalance the economy."
Lagarde said that Spain should be more flexible in its
fiscal adjustment as unemployment was very high and the
recession there was severe.
"We believe that considering the situation of the country
and the 25% unemployment.... we do not see a need to do
upfront, heavy-duty fiscal consolidation as initially planned.
That country needs more time to plan for fiscal consolidation,"
Last year, Spain missed the 6.3% of gross domestic product
target for its budget deficit agreed with the European Union,
as its fiscal gap came in at around 7% of GDP.
Various media reports said Spain wanted to persuade the EU
to relax its deficit target for this year to around 6% of GDP
from an initial 4.5%.
Famous economist Nouriel Roubini told a conference ahead of
the IMF spring meetings that austerity was making things
worse in the eurozone and that countries going
through tough structural adjustments should be allowed more
lenience when it comes to fiscal consolidation.
Emerging countries are doing well but they "face the new
risk of avoiding policy excesses," Lagarde said.
She added that in low-income countries, which record the
fastest rates of growth, policymakers should build on that
growth with measures to boost infrastructure and address social
needs for the progress to be sustainable.
- As every year, Emerging Markets will report live from
the Asian Development Bank and the EBRD meetings taking place
in Delhi and Istanbul in May. Pick up your copy of the
newspaper at the meetings, download the free app for live
updates, check out our website and follow us on