Tuesday, January 24, 2012

IMF chief unveils euro plan and warns of '1930s moment'

In a wide-ranging speech at the German Council on Foreign Relations think tank in Berlin, Ms Lagarde also called for an additional $500bn (£320m) for the IMF as it seeks to keep afloat countries battered by the crisis.
And she had a dire warning for policymakers if they failed to do what was necessary, saying the world could slide into a "1930s moment" of isolationism, which led to the Great Depression and eventually to world war.
On the eurozone, Ms Lagarde acknowledged that a great deal had already been accomplished but that the policies agreed so far "form pieces, but pieces only, of a comprehensive solution."
Read the rest at The Telegraph (UK)
IMF chief unveils euro plan and warns of '1930s moment'
by Agence France Presse
"Even these lower forecasts assume a constructive policy path that is by no means assured," she cautioned.
And she warned that if policymakers failed to grasp the seriousness of the situation, "we could easily slide into a '1930s moment'."
"A moment where trust and cooperation break down and countries turn inward. A moment, ultimately, leading to a downward spiral that could engulf the entire world."
However, Ms Lagarde said, "I believe we can avoid such a scenario ... although the economic outlook remains deeply worrisome, there is a way out."


Dave said...

Hey Tom, what do you think: Does no one understand they need a Continental Parliament, or are they just not allowed to say so?

Tom Hickey said...

The history is pretty clear. The Europeanists realized that they could not get a political union right away, so they went for an economic union without a political union, figuring that greater economic integration would prepare the way for political union.

They did not bank on a financial crisis intervening. Now they are faced with the alternative of either going forward with a political union, which does not seem possible politically yet, or watching the currency union come apart. The problem is that tighter union requires a referendum in most countries, and the voters don't seem to be in the mood to vote for closer ties.

It will be interesting to see where this goes. Maybe TPTB can finesse something. But it remains a warning about trying to force issues before the public is ready.

Ralph Musgrave said...

If Christine Lagarde is doing anything more than re-arranging the deck chairs on the Titanic, then I’ve missed something.