Lagarde Urges Germany to Avoid Austerity

International Monetary Fund (IMF) head Christine Lagarde urged Germany to increase investments to help spur the euro zone’s flagging economic recovery, adding that the bloc as a whole needed to make more structural reforms.

With the euro zone economy in the doldrums, the European Central Bank announced on Thursday a series of measures to stimulate growth, with its president Mario Draghi expanding on a call for governments to support this process with extra spending.

Echoing that sentiment, Lagarde told daily Les Echos in an interview the process could be aided by Germany, which is borrowing at record-low rates and on track to record a public sector surplus for the third year running.

“We think that public or private investment (in Germany) to finance infrastructure would be welcome,” she said, stressing this did not mean making the German economy less competitive.

Asked in a second interview on Radio Classique whether Germany could do more to spur a European economic recovery, Lagarde told the radio: “It seems to us at the International Monetary Fund that it (Germany) can go a bit further, that it can do a bit more, in Germany’s interest.”

Under pressure from major euro zone peers like Italy and France to boost public investment and cut taxes, German Chancellor Angela Merkel has left the door open to channelling the budget surplus into spending programmes.

She said investments would take priority if Germany had money available but the government first had to see how the economy developed.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza