Integration Offers Path to Prosperity in Eastern Europe, Says Lagarde

Lagarde wraps up visits to Romania, Lithuania

Stresses power of integration to help achieve lasting growth and job creation

Continued policy reforms, structural improvements needed to boost competitiveness

Lagarde’s visit, her first to these countries as head of the IMF, comes at a time when potential growth across the region has slowed substantially in the wake of the crisis, from over 5 percent in 2007 to less than 2½ percent in 2012, and when policymakers in the region are searching for ways to secure a sustained and robust recovery for their economies.

Her visit to Romania included meetings with the country’s leaders, parliamentarians, and civil society—including business and women leaders—as well as a speaking engagement in Bucharest at the conference, ''Eastern Europe and Romania: The Path to Prosperity,” hosted by the National Bank of Romania. In Lithuania, she met with the country’s leaders and took part in a panel discussion on European Economic Integration: Taking Stock of Challenges and Opportunities.”

Seizing the opportunity of integration

“I firmly believe that integration is a big opportunity and the right future for Eastern Europe,” Lagarde said during the Bucharest speech, and reminded that integration and reform delivered rapid growth in Eastern Europe between 1995 and 2007.

Lagarde acknowledged that integration also carries risks, referring to the “heavy losses” for the countries, and people, of the region after the crisis hit in 2008. “The lesson is certainly not to turn your backs on European integration,” she underscored, noting that the region can harness the power of integration to achieve lasting growth and job creation. “Above all, the path to greater prosperity requires determination. If the crisis tells us anything, it is that policy actions take time to create change and generate growth.”

Moving to a higher growth path

Lagarde emphasized three key policy areas that would help countries in the region achieve lasting growth and job creation:

• Ensuring macroeconomic stability by building on fiscal achievements to date;

• Advancing structural reforms to boost competitiveness; and

• Improving social protection and sharing the burden of adjustment fairly.

Turning to Romania, Lagarde commended the reforms taken over the past several years to begin “chipping away at the barriers to higher growth.” She highlighted, in particular, the steps taken to gradually liberalize energy prices. But to ensure growth is lifted...