- Jan 2010
The world prays for an economic miracle
By Ben Chu, Economics Editor in Washington
Saturday, 24 September 2011
After an incredibly volatile day on world markets, the head of the International Monetary Fund, Christine Lagarde, warned of a looming "collapse in global demand" which threatens to push economies around the world into a new recession.
"Dark clouds over Europe and huge uncertainty in the United States" mean that "the challenge could not be more urgent", she told politicians and leading economists in Washington, who are meeting there in an attempt to tackle the world's economic woes.
Calling for immediate action to support global growth and stabilise the international financial sector, Ms Lagarde said: "The actions I am calling for today are not for the coming years – they are for the coming months."
The stark warning followed the failure of the G20 group of leading economies to convince investors that they would avert a new global banking crisis. A communiqué from G20 finance ministers and central bank governors pledging to "take all necessary action to preserve the stability of banking systems and financial markets" failed to deliver a significant lift to investor sentiment. Stock markets in Europe and the US picked up slightly by the close of trading yesterday, but generally failed to recover the large losses experienced earlier in the week.
The Chancellor, George Osborne, who is in Washington for the IMF summit, attempted to ratchet up the pressure on his European counterparts, warning that they had six weeks to agree on radical measures to address the eurozone sovereign debt crisis before the next G20 meeting in November in Cannes. "There is now a quite clear deadline set which is the Cannes summit," he said. "The eurozone has six weeks to resolve this political crisis." The Chancellor claimed that European finance ministers are finally waking up to the fact that they must act faster to resolve the Continental debt crisis, saying that the "leading lights of the eurozone are aware of the fact that time [is] running out for them".
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Despite instructing European leaders to take radical action in the face of the looming economic emergency, Mr Osborne refused to budge from his own radical deficit-reduction strategy. The Chancellor rejected claims he is contributing to the deficiency of global demand with his determination to wipe out the bulk of the UK's budget deficit by the end of this parliament. "This is a debt crisis. You can't separate debt and demand," he said. "They are intricately linked. Unless you deal with debt you can't deal with demand."
The Chancellor also stressed that, despite his opposition to the UK ever joining the single currency, it is in Britain's national interest for the eurozone to survive the present crisis: "I'm very clear that a break-up of the euro is bad for Britain ... It is in Britain's interest that the euro works, that it's stable."
more: The world prays for an economic miracle - Business News, Business - The Independent
"Despite instructing European leaders to take radical action in the face of the looming economic emergency, Mr Osborne refused to budge from his own radical deficit-reduction strategy. " That is not an encouraging sentence....