IMF Chief Lagarde Warns of Risks to Eurozone Recovery

IMF chief Christine Lagarde says euorzone economies are not out of the woods yet. She cites access to credit, low inflation and competitiveness as the key risks and issues for the bloc.

“The recovery is under way, that is correct,” Christine Lagarde told German daily Handelsblatt in an interview. “Some countries have successfully implemented aid programs, but that doesn’t mean thecrisis is over and our mission accomplished.”

The head of the International Monetary Fund (IMF) says access to corporate credit is still an issue, especially in southern Europe. She warns European governments not to be complacent. “You’re setting yourself up for disappointment, it’s a false sense of security.”

She also called for monetary policy to “continue to encourage growth.” European governments should push to improve competitiveness through labor market and structural reforms.

“All European countries need to do their homework, even the star pupils,” she told Handelsblatt. She warned Germany in particular not to rest on its laurels as Europe’s leading economy and implement the planned pension reforms as soon as possible.

With regards to Ukraine, Lagarde said the conflict there “is a new risk for the global economy” the impact of which was hard to gauge at the moment. But she said the conflict is likely to have a marked impact on international trade, foreign direct investment, energy supplies and global capital flows.

She said Ukraine would need more than the $17 billion dollars that have already been earmarked for the country by the IMF. “The international community doesn’t have a choice, we can’t just say the situation is too volatile, we won’t give any money now,” she told Handelsblatt.

Source: Reuters