The Kenynesian Christine Lagarde

Christine Lagarde’s call at the Jackson Hole symposium at the weekend for a recapitalisation of Europe’s banks has set the cat among the eurocrat pigeons.

But there’s something in the new head of the IMF’s remarks which could cause a fluttering in the British dovecotes too: her espousal of a Keynesian approach to deficit reduction in countries that retain some room for manoeuvre in the bond markets.

“While fiscal consolidation remains an imperative, macroeconomic policies must support growth. Fiscal policy must navigate between the twin perils of losing credibility and undercutting recovery. The precise path is different for each country. But to meet the credibility test, each country needs a dual focus: a primary emphasis on durable measures that will deliver savings tomorrow which, in turn, will help to create as much space as possible for supporting growth today—at least by permitting a slower pace of consolidation where possible.”

And then there’s this:

“Growth is necessary for fiscal credibility—after all, who will believe that commitments to cut spending can survive a lengthy stagnation with prolonged high unemployment and social dissatisfaction?”

George Osborne has generally liked what the IMF has said in the past about his deficit reduction strategy. But Ms Lagarde, in calling for a slower pace of fiscal consolidation and a focus on immediate-term demand, sounds closer to Ed Balls’ position than that of the Chancellor.

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• Guest

  Kenynesian?

• RiskManager

  No she is not calling for slower fiscal consolidation in the UK.  That is the spin Ben puts on it.

  France is in trouble, the Euro may split leaving it with the South.  A French hand is in your pocket, can you not feel it Ben, or maybe just a soft blowing in your ear maybe?

  In the 1930’s France demanded her gold back.  Things come round again because it is the same people you see.

  Today the UK enjoys the confidence of global lenders, growth above the US and EU in the latest quarter and a realistic and credible plan to stay the least ugly in the global ugly competition currently underway.  

  Of course France longs for others to be a little uglier, then it can shine again perhaps.  Quelle surprise Rodney!

• greggf

  “…. will help to create as much space as possible for supporting growth today…”
  Sounds more like a coded call against (more) Big Government.
  I’m not sure Keynes is very well known in France….

• JHARC

  So, no more endorsements from the IMF for Osborne’s disastrous policies?  Lagarde’s position IS the same as Balls’.  No doubt about it.  Her point about no one believing in a policy of cuts in the face of continuing high unemployment and “social dissatisfaction” (riots?) should put paid to Osborne’s one and only Plan A.

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  have you seen what the imf has done during the 80′S in Africa and latin america who’s next victim?

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  Have you seen what the Imf has done in africa, latin america,and with all these bright economists they could not see that something was going wrong in 2008 before the subprime crisis, they also said concerning the management everything was all right in tunisia 2 weeks before the uprising.