Cooperation Will Pay Off if World Acts Now—Lagarde

Weak recovery, sharply increased risks have led to crisis of confidence

Advanced economies bear prime responsibility for addressing global crisis

Emerging market, low-income countries harvesting fruits of sound policies

Addressing the opening session of the 2011 IMF–World Bank Annual Meetings in Washington D.C., Lagarde said risks have increased sharply amid a weak and uneven recovery.

“Inclusive, job-creating growth must be our goal. But today, we risk losing the battle for growth,” Lagarde said in her keynote speech. “With dark clouds over Europe, and huge uncertainty in the United States, we risk a collapse in global demand.”

Lagarde was speaking at the formal opening of the Annual Meetings, which comprise events attended by around 10,000 policymakers, private sector and civil society representatives, journalists, and academics. The events also provide an opportunity for economic leaders to consider collective solutions to the major problems confronting the world.

The proceedings followed the release of the IMF’s latest forecasts for global output, its report on world financial markets, and its review of international fiscal policies. The buildup to the Meetings also featured a debate on the world economy in the IMF headquarters building that was globally televised by the British Broadcasting Corporation.

The Meetings were also preceded by release of a communiqué from the Group of Twenty leading advanced and emerging economies, in which they committed to “taking all necessary actions to preserve the stability of banking systems and financial markets as required.” The G-20 pledged to ensure that banks are adequately capitalized and have sufficient access to funding to deal with current risks. The communiqué also said central banks will continue to stand ready to provide liquidity to banks as required, and that monetary policies will maintain price stability and continue to support economic recovery.

Moment of choice

Lagarde said the Meetings took place at a pivotal moment of choice. “Depending on the choice we make today, and in the weeks and months ahead, our collective economic fortunes will advance or fall back.”

Emerging market and low-income countries are doing better, harvesting the fruits of sound policy choices, Lagarde noted. But she added that the global south is not immune to missteps in the global north.

“Let us be frank—the primary burden of responsibility for addressing the current crisis lies with the advanced...