The world economy is not plunging headlong into a disaster, but must do better, says International Monetary Fund head Christine Lagarde.
She lambasted world leaders and finance minister for failing to take more decisive action to lift the global economy to greater heights.
Lagarde also warned the IMF was ready to slash already poor performance figures.
She blamed poor growth on governments failing to react to China shifting focus from exporting goods to concentrating on domestic demand, a dip in commodity prices and borrowing difficulties on many countries.
“This is a wake-up call not a danger alarm,” said Lagarde. “Growth is not as good as we would like, but that does not mean the global economy is in recession.
Co-ordinated action needed
“However, the recovery is not setting the world on fire and while things are this delicate, risks of derailing the economy and slipping back into recession increase.”
Lagarde appealed for policymakers to team up and co-ordinate their actions – citing decisions that needed to be made, like the US government hiking the national minimum wage, Europe to improve skills training for the jobless and emerging economies to curb subsidies and to increase social spending.
“If everyone gets together and pushes forward as one, the effects on the global economy will be substantial and enough to trigger much more growth,” she said.
Lagarde was speaking ahead of the IMF and World Bank spring meetings which the leaders and finance ministers of almost 200 countries will attend in Washington DC later this month.
WikiLeaks denial
She credited the US and Mexico for showing positive growth, but voiced disappointment over economic progress in Europe and Japan. She also explained China’s economic transition was damaging the economies of oil and commodity producers such as Brazil and Russia.
“Governments need to consider tax incentives for start-ups and to help existing companies grow,” said Lagarde.
“The IMF believes a 40% increase on research spending could boost the world economy by 5% over the next two decades.
She also denied the IMF was pulling out of the European bailout program with Greece to force the Eurozone to invest more cash.
The threat was revealed in a WikiLeaks publication of a IMF conference call.
“The IMF plays a central role in the bailout program and would not leave or blackmail other members,” she said.
