The international economics journalists who piled into the conference room at the International Monetary Fund’s Washington headquarters Thursday morning might have thought they were in for a complex and technical-term-laden readout on the state of the global economy.
Instead, they got a weather report.
“We are seeing a light recovery blowing in a spring wind,” said IMF Managing Director Christine Lagarde, who this weekend is overseeing her first spring IMF meetings since she took the helm of the international economic stability institution last July. “But,” she added, “we are also seeing some very dark clouds on the horizon.”
The meteorological analogy was almost folksy, but by putting the world’s economic forecast in layman’s terms, Ms. Lagarde seemed to be making this point: The global economy is not the rarefied domain of a few financial officials, macro-economic theorists, and multinational corporations, but rather is all about the well-being of the 7 billion human beings who populate the Earth.
As the former French finance minister (and onetime agriculture minister) quipped before launching into TV meteorologist mode, everybody is interested in the weather.
Lagarde spelled out what she means by a “light recovery in a spring wind.” The IMF has upgraded modestly its forecasts for world economic growth in 2012 and 2013. Countries as varied as China and Greece came in for special praise: China for recently widening the band of fluctuation of its currency against the dollar – a move Lagarde said was “not at all a baby step” in addressing what many world leaders have complained is China’s artificially low currency aimed at keeping its products cheap; and Greece for taking difficult decisions to right its financial ship.
But she also ticked off worrisome factors constituting the economy’s “dark clouds.” Among them: stubbornly high unemployment in many countries; a potential for oil prices to stay high; “deleveraging” (whoops, a few rarefied technical terms did sneak into Lagarde’s presentation), or the practice by which banks shrink their balance sheets and credit pools, thereby limiting prospects for economic growth; and “renewed distress in the eurozone.”
Indeed, Lagarde referred to Europe as the “epicenter” of the world’s financial troubles, and she called on Europe to do more to address its own issues even as she touted a large boost in IMF funding, which she is organizing, as a potential help to some European countries, such as Spain.
Lagarde is seeking several hundred billion dollars in additional lending capacity from IMF member countries, saying the IMF needs that “additional firepower” to help fend off repercussions from Europe’s debt crisis.
She returned to the weather analogy whenever the discussion of the global economy threatened to turn too arcane and technical. Later Thursday, appearing on a Bloomberg Television show, she again referred to the “clouds on the horizon” of the global economy.
If the problems facing the world’s finances are like dark clouds, she said, then the beefed-up funding she is soliciting from IMF members is like an “umbrella” to protect a number of national economies facing financial distress. By the end of the IMF meetings Sunday, Lagarde may have secured more than the $400 billion she is seeking, meaning the "umbrella" will be more than ready for the threatening economic storms.