Lagarde calls for fiscal stimulus in US and EU

Tim Wallace
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INTERNATIONAL monetary fund (IMF) chief Christine Lagarde is urging US and EU leaders to counter the confidence crisis hitting their economies.

“Looking at Europe, we recommend countries adjust their austerity programmes to a changed situation and consider measures to drive growth,” she told German magazine Der Spiegel yesterday.

She suggested that countries like Germany, with healthier public finances, may be best placed to launch a fiscal stimulus. “It all depends on the circumstances, of course,” she said. “If exports, the foundation of the German economy, collapse, the government could push back.”

“If Germany stimulates domestic demand, it is good for the German economy and for its neighbours.”

Lagarde was direct about her wishes for more US stimulus.

“If the US launches a credible middle-term adjustment programme, there is possibly room to abandon the short-term austerity measures and to introduce some measures to drive growth,” she said.

The IMF chief repeated her statements made last week in which she called for a forced recapitalisation of Europe’s banks – demands which politicians across the continent rejected, claiming enough has already been done to support the banks.