IMF chief urges action to avoid ‘1930s moment’

The chief of the International Monetary Fund warned on Monday that the global economy could slide into a “1930s moment” unless Europe deals with its debt crisis and other economic powerhouses such as the U.S. and China fulfill their responsibilities. Christine Lagarde called for stronger growth, larger firewalls and deeper integration in the euro zone to stem the crisis after the “many false starts and half measures” seen in 2011. She delivered this stark message in Berlin, the capital of Germany — Europe’s biggest economy and the most important player in resolving the long-running crisis. Her remarks come ahead of the World Economic Forum’s annual meeting in Davos, Switzerland, which begins on Wednesday and ahead also of the Jan. 30 summit of European Union leaders in Brussels.

“What we must all understand is that this is a defining moment,” Lagarde said at the German Council on Foreign Relations, according to the prepared text of her speech. “It is not about saving any one country or region. It is about saving the world from a downward economic spiral. It is about avoiding a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand.” The “1930s moment” appears to be a reference to the Great Depression of the 1930s, when the crash on Wall Street in 1929 triggered an economic depression in the U.S. which later spread around the world. Lagarde said the IMF will lower growth forecasts for most parts of the world in the economic outlook it’s due to release on Tuesday. The turbulence seen in 2011, the IMF chief said, stemmed from “a lack of a collective determination to reach a cooperative solution” both in Europe with the debt crisis and in the U.S. with the debt-ceiling debacle.

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