CFR Update: Lagarde Warns of 'Dark Clouds'

Top of the Agenda: Lagarde Warns of 'Dark Clouds'

IMF Managing Director Christine Lagarde warned of a fragile global economic situation with "dark clouds on the horizon" (NYT), at the start of the IMF and World Bank's spring meetings in Washington yesterday. Lagarde's comments come as borrowing costs are on the rise in Europe and high oil prices are draining spending power in the United States, potentially undermining the global recovery. This weekend's meetings are expected to focus on the ongoing eurozone sovereign debt crisis and global efforts to boost growth. The IMF has called on member states to pledge an additional $500 billion to increase the fund's lending capacity (VOA).

Analysis

"In some ways the crisis may have become more serious now, as today's policy tools lose some of their edge. Spain is a far larger problem than Greece, and it could drag down Italy and perhaps even France. The euro's financial firewall has been strengthened, but it remains inadequate," says the Economist.

"The missing ingredient is trust. What's needed is a plan to revive economic growth and to strengthen the credibility of medium-term fiscal retrenchment. It is surely not beyond the wit of the politicians to recognize as much. As things stand, markets are un-persuaded both of Germany's willingness to sustain the euro and of the political will of debtor states," writes Philip Stephens for the Financial Times.

"And the anxiety is hardly quelled by the responses from policy-makers. On the upside, this week's IMF meeting has seen nations slowly but surely giving cash to boost the eurozone rescue fund. On the downside, very few serious investors have much confidence that the rescue fund will be especially effective in the event of Madrid needing a bailout," notes this Guardian editorial.