IMF chief urges action in tackling euro crisis

The head of the International Monetary Fund on Thursday called for urgent action to tackle Europe's debt problems and an approaching fiscal crisis in the U.S., warning that the struggling world economy is already falling short of even pessimistic expectations, The AP reports.

IMF chief Christine Lagarde, speaking to reporters as the IMF and World Bank began their annual meetings in Tokyo, praised recent steps taken by the European Central Bank and European governments, but said "more needs to happen, and faster."

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

The IMF has scaled back its global growth forecast for 2012 to 3.3 percent from 3.5 percent, and has warned that even its dimmer outlook might prove too optimistic if Europe and the United States fail to resolve their crises.

"We are not expecting a very, very strong recovery. The recovery continues, but it continues more slowly than we had expected earlier this year," said Lagarde. The slowdown is "having a ripple effect on emerging markets, and in particular in Asia."

Lagarde praised the recent steps to shore up Europe's financial system, which has been burdened by high government debt and weak banks in countries such as Greece and Spain, but stressed that more needs to be done.

The ECB has decided to buy unlimited amounts of government bonds to help lower borrowing costs but countries that want to benefit from that measure need to apply to other euro nations for a bailout first.

European governments have also taken steps to reduce budget deficits. A proposal to design a European banking supervision system, however, has run into obstacles, with Germany wanting more time to finalize details before making the ECB the supervisor of banks.

Greece, Ireland and Portugal have already received bailouts from the IMF, European Central Bank and European Union. Spain has worried investors by declining so far to ask for financial aid from the 17 country grouping that uses the euro currency.
"Action has already occurred," Lagarde said. "But more needs to happen and faster.

She also said the U.S. faces major risks in the so-called "fiscal cliff" in 2013, when tax increases and deep spending cuts will take effect unless Congress breaks a budget impasse.

The IMF has urged the U.S. to raise the ceiling on the level of debt the government can issue, which is capped by law. In August 2011, a battle between the Obama administration and Congress over raising the limit wasn't resolved until the U.S. almost defaulted on its debt.

"Here, too, decisive action is expected," she said.
The head of the International Monetary Fund on Thursday called for urgent action to tackle Europe's debt problems and an approaching fiscal crisis in the U.S., warning that the struggling world economy is already falling short of even pessimistic expectations.

IMF chief Christine Lagarde, speaking to reporters as the IMF and World Bank began their annual meetings in Tokyo, praised recent steps taken by the European Central Bank and European governments, but said "more needs to happen, and faster."