The global economic recovery is accelerating but remains vulnerable to setbacks, IMF acting Managing Director John Lipsky said on Thursday, as he urged continued international support for shaky economies in Europe. "The global recovery is gaining strength. But it remains fragile and uneven, and beset by uncertainties," he said at a meeting of the Bretton Woods Committee, a private sector advisory group to the International Monetary Fund and World Bank.
Lipsky expressed chagrin at having to deliver remarks in lieu of the disgraced Dominique Strauss-Kahn, who resigned as IMF managing director overnight as he faces sexual assault charges in New York. "I deeply regret the circumstances that have made it necessary for me to substitute for Dominique Strauss-Kahn," Lipsky said.
He used the speech to signal continuity, not change, and said European nations that are in critical economic condition as a result of sovereign debt crises deserve international support. Strauss-Kahn had been instrumental in helping fashion large IMF support packages for distressed European debtor nations. "There are compelling reasons for their European neighbours and the global community - through the IMF - to support these countries' reform efforts," Lipsky said.
"The only viable option for Europe today is a solution that is comprehensive and consistent - and that is also co-operative and shared," he added. Some eurozone states, including Greece, Ireland and Portugal, are facing massive debt problems. European governments have been discussing a plan to prevent a Greek default. Lipsky said IMF officials are working with the Greek government to support that country's adjustment programs.
Strauss-Kahn's resignation has touched off a search for a successor, with French Finance Minister Christine Lagarde seen as a front-runner. US Treasury Secretary Timothy Geithner on Thursday called for a "prompt succession" but said Lipsky, a US national, could provide "able and experienced leadership" during a critical time for the global economy.
Lipsky, whose term as the Fund's No 2 official expires in August, will serve as acting managing director until the IMF executive board selects a successor to Strauss-Kahn. Lipsky told the Bretton Woods group that emerging market countries concerned about stemming a potentially volatile surge of capital into their economies might be justified on occasion in erecting capital controls.