Lagarde: Deficit plans urgently needed to prevent worse crisis

City A.M. Reporter
THE HEAD of the International Monetary Fund (IMF) yesterday called for “decisive steps” by European policymakers to deal with the region’s financial crisis and suggested that carbon taxes could be used by cash-strapped governments to raise more revenue.

“We need a strategy that is good for stability and good for growth – where stability is conducive to growth and growth facilitates stability,” said Christine Lagarde.

Policymakers should aim for a combination of “very accommodating” monetary policy, use of common resources to provide direct support to banks and growth-friendly policies where fiscally possible.

Lagarde said fiscal stability meant governments in advanced economies should outline credible medium-term plans to lower public debt. Without such a plan, countries might be forced to make bigger adjustments sooner, she cautioned.

Developing economies were holding up relatively well, she said, but could “face a cold chill” if global conditions worsened.