The head of the International Monetary Fund says financial conditions are improving in much of the world, but that differences are "starker than ever" between prospering and struggling economies.
Christine Lagarde, speaking Wednesday in New York, said improvements in financial markets have not translated in some regions "into improvements in the real economy and in the lives of people."
In her speech at the Economic Club of New York, Lagarde described the emergence of a "three-speed" global economy in which some countries, particularly in East Asia, are doing well. She referred to the United States, Sweden and Switzerland as economies on the mend, and said Europe and Japan belong to a third group that still has "some distance to travel' before recovering from the global economic crisis.
Lagarde noted rapid and substantial progress by U.S. policy makers in repairing the world's largest economy, pointing to steady growth supported by solid financial demand. But she also warned of growing U.S. government debt, and called for a "medium-term roadmap" to reduce it.
Lagarde said many banks in the 17-member eurozone were still operating with "not enough capital and too many bad loans on the books." Consequently, she said lower regional interest rates were not benefiting the wider economy.
She also urged European authorities to close some banks, if necessary, as part of a push to step up banking reforms.