Asia clearly continues to drive global economic recovery, but if strains in the euro zone worsen the region will be negatively affected via trade and financial sector links, International Monetary Fund chief Christine Lagarde said on Saturday. Speaking at a news conference after a meeting with Japanese Finance Minister Jun Azumi, Lagarde called for strengthening international co-operation and decisive policy action to ensure strong, sustainable and balanced growth.
"We touched on the consequences that the euro zone crisis has and would have if it deteriorated further in the rest of the world, particularly in Asia," she said. "No country can be immune under the present circumstances no matter how developed or how emerging or how far away it is."
Lagarde's comments followed the IMF's warning that advanced economies could fall back into recession unless policy-makers move with greater urgency to agree on policies to boost growth. Before arriving in Tokyo, Lagarde visited Moscow and Beijing, in a bid to convince the emerging powers to chip in some of their vast foreign exchange reserves to boost bailout funds for the euro zone.
The BRICS - the powerful emerging market economies of Brazil, Russia, India, China and South Africa - have been reluctant to invest directly in Europe's rescue vehicle, preferring to provide financial help to Europe via the IMF. Asked if she had asked Japan for an additional bilateral loan, Lagarde said: "If I had, I wouldn't tell you, because it would be for him to say so Current resources at the Fund are adequate at the moment."
"I know equally that I can rely on my major shareholders, particularly Japan, the second largest shareholder, to be up to the task if the task was to increase resources at the IMF." European leaders are scrambling to avert a euro zone meltdown with Italy moving to approve austerity measures amid global calls for quick action to contain the spread of the debt crisis.
Political clarity and credibility in Italy are two key factors needed in Italy which Lagarde said would have an impact on the way the Italian economy responds. Lagarde said she briefly discussed Japan's intervention with Azumi, and that she was aware that it was done to avoid disorder and excess volatility in the currency market which "is in the spirit of communiqués and statements by the G7". "We take the view that concerted action is the most efficient way of intervening," she added. The dollar slid to 77.10 yen, near the lowest since Japan's massive yen-selling intervention on October 31, estimated at a record 7.7 trillion yen ($99 billion), raising risk of further intervention.
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