“Developments this summer have indicated we are in a dangerous new phase,” warned Christine Lagarde, the new president of the International Monetary Fund during a conference. “The stakes are clear; we risk seeing the fragile recovery derailed. So we must act now.”
The alert is due to the fact that two years after the end of the global financial crisis, growth in the United States and Europe is weak. And the debt crisis in both Europe and the United States has shaken the public’s confidence in a global economic recovery.
Obama and Merkel
The economic powers need to develop long-term plans, as well as keep their debts under control, added Lagarde. At the same time, they should not apply methods of austerity that are too drastic, because in this way they will be risking their own recoveries. Lagarde urged central banks to keep interest rates low and to consider non-conventional methods, if necessary, to defeat the crisis.
U.S. President Barack Obama and German Chancellor Angela Merkel are currently engaged in discussions regarding the recent market turmoil and the European debt crisis. According to the White House, the two spoke over the phone concerning joint measures to be taken to defeat the economic crisis. Obama and Merkel are in agreement about the urgent need for renewed economic growth worldwide as well as the creation of jobs.
Lean cows?
According to estimations from German Minister of Finance Wolfgang Schauble, the global economy may suffer the consequences of austerity methods in some countries. Until the consolidation of the budget actually takes place in some countries, everything could be delayed a few years, explained Schauble.
In addition, the minister called for close cooperation regarding economic policy in Europe in order to ensure long term growth. According to him, immediate structural reforms as well as the rapid consolidation of the budget in indebted countries such as Italy, Spain, Portugal and Greece are extremely important.
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