More time for Greece

For Christine Lagarde, head of the International Monetary Fund (IMF), the troubled eurozone remains the epicenter of the global economic crisis. She said that the IMF is doggedly striving to save Greece, but that the country may need two years more than planned to get back on its own feet. She made the remarks on Thursday (11.10.2012) as IMF and World Bank twice-yearly meetings kicked off in Tokyo. She acknowledged that European policymakers were attempting to solve the eurozone crisis, but said that "the most urgent action is needed" there, and that "more needs to happen and faster."

The good news, she said, was that with the European Stability Mechanism - which began its work on Monday - and the European Central Bank's decision to intervene directly in bond markets, important steps had been taken to stabilize the eurozone debt situation. The bad news, she said, was that the measures have taken months to implement.  The next steps for solving the crisis would have to be swifter and more resolute, she said, particularly in supervising the banking system and in creating the proposed European banking union.

'Not all at once'

While she encouraged swifter action to solve the eurozone crisis, Lagarde also endorsed giving nations on the periphery more time to consolidate their budgets. "Many countries at the same time go through that same set of policies with the view of reducing their deficit," she said, and rather than wanting everything at once, " it's sometimes better to have a bit more time. That is what we advocated for Portugal; this is what we advocated for Spain; and this is what we are advocating for Greece."

Financial markets react in seconds, political decisions require months. The 188 member states whose finance ministers and central bank directors are meeting in Tokyo are all more or less suffering from the global economic slowdown. Above all, it's the emerging markets and developing countries which are increasingly frustrated by the problems of rich and developed Europe spilling over into their own economies, and they're asking why Europe cannot resolve its problems better and more quickly.

Financial markets versus democracy

IMF director Lagarde has thus been forced to defend European crisis management. "It’s going to be a matter of parliamentary process, procedure and practicalities, but that’s the way euro instruments eventually work," she said. "They require the support and the consent of 17 member states that cooperate with their parliamentary institutions and it's a trade-off between financial efficiency and democracy."

The World Bank - the IMF's sister organization, primarily devoted to development policy and tackling poverty - may appear to be working on other fronts, but shares the IMF's aims. "Our Job at the World Bank group now is to make sure that the growth over the last five years that we have seen in Africa, Latin America and Asia is not destroyed by a further worsening of the situation," said World Bank president Jim Yong Kim in Tokyo.

Combating exploding food prices and tackling unemployment are the World Bank's highest priority, but Jim Yong Kim also aims to address the issue of climate change. It's real, the scientists agree on it and it has to be faced, he said, in reference to its effects on droughts, harvests and spiking food prices. New approaches to tackling poverty and climate change must thus go hand in hand.

Aid organization Oxfam immediately applauded Kim's comments. "Too many leaders categorically shy away from naming climate change as a true problem," Oxfam said.