* Priority areas: weak national fiscal positions, weak banks, weak growth
* Lagarde pays tribute to Japan’s leadership during crisis
The global community must work together to meet the challenges thrown up by the global financial crisis and to ensure future stability and growth, says the head of the IMF, Christine Lagarde.
During a keynote speech in Tokyo—the first stop in a three-country trip to Asia—the IMF Managing Director said in today’s interconnected world, countries could not afford to look only at events within national borders.
"This crisis does not recognize borders. This crisis is knocking at all our doors," said Lagarde. "For make no mistake. This is a global crisis," she added.
The crisis beyond European borders
Lagarde said over the past few months, the outlook for the global economy had become increasingly worrying. There are signs that activity is slowing across both advanced and emerging market economies.
The IMF is due to release its growth forecast for the global economy on July 16. It is expected to be lower than anticipated in the institution’s April World Economic Outlook.
Lagarde acknowledged that major steps had been taken to stabilize the European debt crisis, but warned that without continued, decisive measures, the damaging effect on stability and growth would be felt not just in Europe, but worldwide.
To address the common threats facing the global economy, "solutions need to be grounded in cooperation," said Lagarde.
IMF research suggests that a coordinated strengthening of policies across the Group of 20 leading economies (G-20) could raise global GDP by 7 percent and boost jobs by 36 million over the medium term.
Lagarde identified major areas which needed addressing to "break the main chains of this crisis: weak sovereigns, weak banks, and weak growth." By weak sovereigns, Lagarde was referring to the weak fiscal positions and high national debt of some advanced economies.
She said countries must deal decisively with the issue of public debt, as well as restoring the health of the financial sector. But in addition, there needed to be structural reforms, whether in labor, service, or product market reforms.
Japan as a global citizen
The IMF head paid tribute to Japan’s own spirit of solidarity and multilateralism exhibited during 60 years of Japanese membership of the Fund, and the recent crisis.
"When the global economy faced its darkest hours, you stood by your fellow global citizens," she said, recalling that in 2008 and then again earlier this year, Japan was the first country to offer loans to boost IMF resources, and help stave off an even more direct, global economic collapse.
Japan has also contributed more than any other country to the IMF’s concessional lending program and its technical assistance and capacity building, as well as supporting more than 660 students through the IMF’s scholarship program.
Lagarde said she looked forward to the forthcoming IMF-World Bank Annual Meetings, due to take place in Tokyo in October.
"All eyes of the world will be on Japan as we seek to find global solutions to global challenges," said Lagarde.
Trip to Asia
Lagarde’s speech came on the second of her four-day trip to Japan. Earlier she met with top Japanese officials including the Finance Minister Jun Azumi, Bank of Japan Governor Masaaki Shirakawa, and Prime Minister Yoshihiko Noda.
Later in the day, she will hold a private dinner with Japanese women leaders when Lagarde is expected to pay tribute to them for their contribution to the economic success of the country. On Saturday, the IMF chief will hold a town hall meeting with university students at Keio University.
After Japan, Lagarde will travel to Indonesia to meet with top officials from that country. Following a three-day stopover in the capital, Jakarta, the Managing Director will travel to Thailand where she is scheduled to participate in a seminar, "Towards a More Stable Global Economic System", being hosted by the IMF, the Asian Development Bank, and the Government of Thailand.