Economic crisis in 'dangerous new phase': IMF chief

Lagarde warned of a vicious cycle of weak
growth and weak balance sheets
© AFP/FIle Gerard Julien

WASHINGTON (AFP) – IMF chief Christine Lagarde warned on Thursday that the economic crisis in developed economies has entered a “dangerous new phase” worsened by feeble political leadership.

A “vicious cycle” of weak growth and weak balance sheets is gaining momentum, she said, adding the cycle “has been exacerbated by policy indecision and political dysfunction.”

“Uncertainty hovers over sovereigns across the advanced economies, banks in Europe, and households in the United States,” she said in a speech in Washington.

“Weak growth and weak balance sheets — of governments, financial institutions, and households — are feeding negatively on each other, fueling a crisis of confidence and holding back demand, investment, and job creation,” she said.

“Without collective, bold, action, there is a real risk that the major economies slip back instead of moving forward.”