Lead­ers need to fix bro­ken eco­nomic mod­els: IMF chief

Global Times - - World -

World lead­ers need to fix global trad­ing sys­tems in­stead of try­ing to tear them down, In­ter­na­tional Mone­tary Fund (IMF) chief Chris­tine La­garde said Wed­nes­day, in a re­buke to na­tion­al­ist politi­cians push­ing tar­iffs and pro­tec­tion­ism.

Her com­ments come as a trade spat be­tween China and the US threat­ens eco­nomic growth around the world, with IMF ex­perts warn­ing of “new vul­ner­a­bil­i­ties” in the global sys­tem.

“We need to work to­gether to de-es­ca­late and re­solve the cur­rent trade dis­putes,” La­garde said at an IMF and World Bank gath­er­ing in Bali.

“We need to join hands to fix the cur­rent trade sys­tem, not de­stroy it,” she added.

Around 32,000 mem­bers of the global fi­nan­cial elite are on the In­done­sian hol­i­day is­land for a week of dis­cus­sions that have been clouded by US Pres­i­dent Don­ald Trump’s Amer­ica First trade pol­icy.

Trump has levied or threat­ened tar­iffs on goods from economies around the world, notably China, but also on tra­di­tional al­lies such as the Eu­ro­pean Union.

A rise of US in­ter­est rates has also helped send emerg­ing mar­ket cur­ren­cies into a tail spin, as coun­tries that bor­rowed heav­ily in dol­lars race to pay back their debt.

The IMF’s lat­est re­port on world fi­nan­cial sta­bil­ity, re­leased Wed­nes­day, said global growth could be at risk if emerg­ing mar­kets de­te­ri­o­rate fur­ther or trade ten­sions es­ca­late.

“New vul­ner­a­bil­i­ties have emerged and the re­silience of the global fi­nan­cial sys­tem has yet to be tested,” it said in the bian­nual Global Fi­nan­cial Sta­bil­ity Re­port.

Mar­ket par­tic­i­pants “ap­pear com­pla­cent” about the po­ten­tial risks from a “sud­den, sharp tight­en­ing of con­di­tions” – like ris­ing in­ter­est rates or de­clin­ing ac­cess to cap­i­tal.

More tar­iffs and their coun­ter­mea­sures “could lead to a broader tight­en­ing of fi­nan­cial con­di­tions, with neg­a­tive im­pli­ca­tions for the global econ­omy and fi­nan­cial sta­bil­ity,” the fund warned.

La­garde told her au­di­ence Wed­nes­day that she did not feel overly gloomy about global con­di­tions.

“It’s tempt­ing to be a bit de­pressed about this per­spec­tive but I’m ac­tu­ally hope­ful be­cause there is a clear ap­petite to im­prove and ex­pand trade,” she said.

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