IMF chief warns of a ‘lost decade’ for global economy
The head of the International Monetary Fund, Christine Lagarde, has warned that the global economy is at risk of being plunged into a “lost decade”.
Ms Lagarde said the ongoing debt crisis in Europe has resulted in an uncertain outlook for the global economy.
The IMF chief added that whilst efforts to solve the crisis were heading in the right direction, more needed to be done to restore confidence.
Speaking in China, Ms Lagarde called upon Beijing to rebalance its economy.
“Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand,” she said.
“We could run the risk of what some commentators are already calling the lost decade,” Ms Lagarde added.
Ms Lagarde’s comments come amid fears that the debt crisis in some peripheral countries may be spreading to some of the euro area’s biggest economies.
On Tuesday, Italy’s cost of borrowing hit the highest level since the euro was founded in 1999. The yield on Italian 10-year government bonds rose to 6.77%, raising concerns about its capacity to service its debts.
Many investors believe that Italy may have to bailed out just like Greece, the Irish Republic and Portugal.
The fear is that as the eurozone debt crisis spreads, it will have a big impact on the international economy.
At the same time, there have been concerns about a slowdown in the US as it struggles to boost growth and tackle stubbornly high rates of unemployment.
Ms Lagarde said the combination of these factors were a big threat to global growth.