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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (105528)	4/13/2014 12:53:15 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 219981

As Global Econ Improves,Attention Turns to Struct Reform 12-Apr-2014 --IMF's Lagarde: Econs w/IMF Loans Already Applied Struct Reforms,Doing Better --IMFC Chair: Concerns Over New Financial Risks,More Herd-Like Mkt Behavior --IMFC Chair: Need Intl Safety Net to Provide Liquidity,Prevent Reserve Build Up By Heather Scott WASHINGTON (MNI) - As the global recovery turns the corner, even while it remains fragile and unsatisfactory, policymakers now must turn their attention to key structural reforms that will increase competitiveness, boost growth and reduce unemployment, top world finance officials said Saturday. Finance ministers and central bankers attending the Spring meetings of the International Monetary Fund and World Bank "spent a lot of time discussing structural reforms" which will be needed in this "new phase of the economic recovery global recovery," said Singapore Finance Minister Tharman Shanmugaratnam, chairman of the IMF's steering committee. But they are also concerned about emerging financial risks, including continued financial market volatility, especially capital flows to emerging markets, Tharman told reporters following the meeting of the International Monetary and Financial Committee. IMF Managing Director Christine Lagarde told reporters that the countries that needed financial support to recover from the crisis already have taken the reform steps and now are doing better. "It's quite striking to see that the European countries that have been under program over the last three or four years have indeed undertaken those structural reforms, and it's beginning to show. It's beginning to unleash results," Lagarde said. But now ,"Many countries that have not had an IMF program ... have to embark on those structural reforms as well." A source who attended the meetings told MNI that the topic of structural reform dominated most of the official discussions Saturday, even while headlines tended to focus on Ukraine and the failure of the U.S. Congress to approve the 2010 IMF quota reform. Tharman said the greater focus on structural reform does not mean withdrawal of stimulus needed during the acute stage of the global crisis, but greater focus on issues such as "balance sheet repair in banking systems, including Europe; improving the functioning of labor markets, so as to reduce the extraordinarily high levels of youth unemployment in many parts of the world; and building up institutions ... including in advance economies." He also said the global finance officials also displayed "much greater concern about ... new financial risks," not just those left over from the crisis, including the increase in corporate leverage "which is not matched by growth in investment," as well as "the continued risk of volatility in capital flows to emerging market economies" which he said "is going to be a continuing challenge." In addition to an increase in capital flows there also has been a change in composition, with a "greater share taken up by bond funds, mutual funds and ETFs, reflecting retail investors who tend to be a little more jittery," he said. "We have observed more herd-like behavior in markets ... driving capital flows. That's a continuing risk," Tharman cautioned. Asked about the impact of tightening financial conditions, especially as the U.S. Federal Reserve withdraws its massive monetary stimulus program, Tharman stressed the need for good domestic policies in developing countries, but also for the creation of a new international safety net to provide rapid liquidity support in times of crisis. "There is an important space in international finance that is still missing, a space that provides quick assistance, quick liquidity in times of crisis to well-managed countries, without conditionality because they are well managed and they're prequalified," he said. "A well-designed international safety net," he said, "can reduce the need over time for developing countries over time to build up their own reserves at the cost of growth." The IMF is working on the issue but he said it is not urgent and "requires careful study and deliberation because you want to avoid moral hazard." Meanwhile, developing countries "have to place more emphasis on resilience in our own economies," he said. For the global economy more broadly, he said it is impossible to eliminate financial crises, but it is important to avoid repeating the mistakes of the past of making bad policies in good times. "We've got to focus on good sustainable policymaking, and not repeat mistakes of the past." Lagarde said there are signs of rebalancing evident in data from the U.S. and Chinese economies, and even Greece has returned to financial markets. "But there is more rebalancing to be had in various emerging market economies that show deficits, and in northern Europe that show large surpluses. Asked about the failure of the U.S. government to approve the IMF quota reform - which shifts voting power to large emerging market economies and provides for a larger pool of crisis lending resources - Tharman and Lagarde repeated their disappointment, but said they are confident there is support for the reform in the U.S. Congress. And, if not, the IMF will look for alternatives. Tharman said he has "every confidence it will be done" because there is "much greater political consensus building within the Congress on the need for a strong IMF in face of very obvious challenges in global economy." Many officials at the Washington meetings have said the failure to approve the reforms erodes the IMF's credibility, and Tharman cautioned that a lengthy delay could spark a "disruptive change" in the multilateral system. Lagarde said there will be debate in the IMF in early 2015 if the reform not completed by then on options to move forward to achieve the necessary changes even without U.S. support - something many developing countries, and a major U.S. think tank, have called for.