IMF wants new stimulus instead of austerity

United States, New York: Christine Lagarde, Managing Director of the International Monetary Fund. (AFP Photo / Mario Tama)
In a recent interview with the German press, new International Monetary Fund Head Christine Lagarde spoke with hope about the future of global economy, but warned developed counties that they should still act responsibly to avoid another recession.

Speaking to Der Spiegel, Lagarde says that the world isn’t far off from another recession, but could avoid it if the necessary actions are taken to safeguard the economy. “The spectrum of policies available to the various governments and central banks is narrower because a lot of the ammunition was used in 2009,” says Lagarde. “But if the various governments, international institutions and central banks work together, we’ll avoid the recession.”

As countries impose austerity measures to keep their economy afloat, Lagarde warns that they need to embrace these actions to avoid a relapse, saying, "countries must adapt their savings plans and squarely look to growth-boosting measures.”

"We see that there has been, particularly over the summer, a clear crisis of confidence that has seriously aggravated the situation,” Lagarde says to Der Spiegel, and warns that “Measures need to be taken to ensure that this vicious circle is broken.”

Discussing the dire situation directly impacting America, Lagarde says that “As long as the US puts in place a credible medium-term adjustment plan, there is probably space at the moment to contain the short-term adjustment and take some of those growth-inducing measures.”

In the meantime, however, growth looks unlikely stateside. The latest string of statistics courtesy of the Department of Labor reveal that America saw zero job growth for the month of August, and economist Patrick O’Keefe from the accounting firm JH Cohn told Reuters he didn’t expect a slump for the American economy, but rather statistics to only “slouch and stagger” for the time to come. The White House predicted last week an employment resurgence during the next 12 months, but the country would have to drastically create jobs over the next year to make that happen.

Responding to RT last week, author Stephen Denning said, "You have whole sectors which are gone, sectors which are at risk and a few sectors that are still there."

In her interview with Der Spiegel published over the weekend, Lagarde said that countries need to cope with the changing times. “In a world that is so economically interwoven, where the actions of industrial countries have direct influence on emerging economies, one can't be stubborn when the situation changes,” said the IMF head.