International Monetary Fund Managing Director Christine Lagarde said the main risk to global growth is a return of Europe’s debt crisis, even as data indicate an improvement in economies including the U.S.
A recent move by European governments to increase their crisis defenses is only part of the solution, Lagarde said, adding she is hopeful to see progress on her pledge to increase IMF resources when member countries meet in Washington next week.
“Risks may not be as large as estimated earlier this year,” Lagarde said in a speech in Washington today. “But let us make no mistake, the risks and the needs are still sizable and it would be very imprudent to ignore that fact.”
Lagarde’s efforts over the past six months to get $500 billion in additional lending resources have been met with reluctance from member countries to contribute in the absence of further European action. Her comments today come as Spain sees borrowing costs nearing levels that prompted Greece, Ireland and Portugal to seek bailouts from the European Union and the IMF.
European governments last month increased their firewall above a symbolic $1 trillion mark.
Lagarde said that some data in the U.S. indicate the country “may be beginning to turn the corner” and that “financial strains have eased somewhat since December.”
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