Ayanna Nahmias, Editor-in-Chief
Last Modified: 01:14 AM EDT, 27 September 2012
WASHINGTON, DC – Christine Lagarde, the International Monetary Fund, Managing Director is arguably the most powerful woman in global finance next to German Chancellor Angela Merkel.
Merkel is noted for her role in trying to resolve the Eurozone debt crisis, as leader of Europe’s biggest and most robust economy. Merkel has also been named by Forbes magazine as the most powerful woman in the world.
Since the global economic slowdown, various countries have struggled to retire debt in the face of increased jobless rates, volatile financial markets, and decreased GDP.
Therefore, when Lagarde announced that the IMF is set to cut its forecast for global growth next month, the news was greeted with trepidation by the United States and other governments including China.
At issue is the growing lack of confidence in the ability of European policymakers to attack head on the crisis affecting the Euro Zone, as well as an increased unwillingness by countries with strong economic growth and low debt, like Germany, to support the bailout of countries that refuse to implement effective austerity measures.
In fact, the S&P 500 fell for a fifth straight trading day on Wednesday as protests in Spain and Greece over euro zone austerity measures raised fresh concerns over Europe’s ability to get its debt crisis under control. The possibility of countries with stronger economies defecting from the euro zone in favor of a return to their national currency also contributes to continued market instability.
When Lagarde announced that the IMF is cutting its global growth projection for 2013 to 3.9 percent although it left its 2012 forecast at 3.5 percent in July 2012, it was widely viewed as a lack of confidence in Europe’s ability to resolve the euro zone crisis.
In particular it was viewed as a tacit indictment of government officials inability to effectively address the economic downturn in their respective countries. The failure of these countries to implement austerity measures to reduce their debt has adversely affected the economies in the rest of the world.
In fact, Lagarde stated that she believes the euro zone crisis poses the greatest risk to the world economy followed by the looming U.S. fiscal cliff which she believes also presents a “serious threat.”