The head of the International Monetary Fund is issuing a fresh warning about the consequences of a lack of global economic growth. Meanwhile, the new leader of the World Bank is vowing to make fundamental changes to the largest global development institution.
Unless there is growth, the future of the global economy is in jeopardy. That is the warning IMF managing director Christine Lagarde delivered at the formal opening of the joint meeting with the World Bank Friday.
Her statement comes amid disagreement on the prescription to cure Europe's economic ills, especially for hard hit countries such as Greece.
Germany and the European Commission want to keep austerity measures in place so as not to potentially undermine the overall recovery plan.
German finance minister Wolfgang Schauble says there is “no alternative” to reducing, in the medium term, the high sovereign debts.
But the IMF seems to have softened its stance, now suggesting austerity programs, weighing heavily on millions of Europeans, should not focus on specific targets and countries should be given more time to cut debts.
Once growth is restored, Lagarde says, then it will be crucial to reduce those debts which she characterizes as vulnerably standing at “wartime levels” in developed countries.
"Reducing public debt is incredibly difficult without growth," she said. "High debt, in turn, makes it harder to get growth. So it's a very narrow path that needs to be taken. It's a narrow path. It's probably a long path and one for which there is probably no shortcut either. But that's the path that needs to be taken."
Lagarde was followed at the podium by World Bank president Jim Yong Kim, who took his post three months ago.
Kim is vowing to turn his 66-year-old institution, best known for making loans to developing countries, into a “solutions bank” more focused on results and able to more quickly implement projects it decides to support.
"It's time to bend the arc of history," he said. "With global solidarity underpinned by a relentless drive for results we can, we must and we will build shared prosperity and end poverty."
Kim, a physician and anthropologist by training, promises a year from now to unveil new goals intended to dramatically slash the number of people living in the worst conditions. But even Kim admits the challenge will be daunting amid a global economic slowdown.